BNP Paribas Mortgage and Deutsche Bank AG have filed separate lawsuits against Bank of America over hundreds of millions of dollars in losses they suffered by investing in asset-backed commercial paper Ocala, reported Bloomberg.
BNP Paribas and Deutsche Bank purchased a total of $1.6 billion in asset-backed notes issued by a special-purpose commercial vehicle called Ocala Funding. Reportedly, Ocala provided funding for mortgage loans originated by Taylor, Bean & Whitaker Mortgage. To minimise risk, both the banks insisted that Ocala hold $1.6 billion in cash or mortgage loans as collateral to be deposited with Bank of America, the deal’s trustee, reported the news agency.
Deutsche Bank reported in its Q3 earnings statement that it had lost around $527m in the deal. In a complaint the Frankfurt-based bank said that it had “trusted that BofA, one of the nation’s largest and most well-known financial institutions, would perform the gatekeeper function reasonably and responsibly. In myriad ways, BofA failed to carry out its various duties designed to protect DB’s investment.”
Both the banks claimed that the Charlotte, North Carolina-based bank improperly transferred billions of dollars out of Ocala accounts, didn’t track mortgages it was holding as security, as it promised to do. They also said that Bank of America had issued false statements about the amount of collateral it held and took other steps that misled the two banks.
However, William Halldin, a spokesman Bank of America, said: “We share BNP and Deutsche Bank’s concern about the handling of funds by Taylor, Bean and Whitaker and Colonial Bank and have been actively pursuing recoveries in the Colonial and TBW bankruptcies on behalf of these and other investors in the Ocala facility.
“BNP and Deutsche Bank’s effort to hold Bank of America responsible, however, is misguided. We fulfilled our contractual obligations in our limited administrative role with respect to the Ocala facility,” reported the news agency.
