According to the article, the Oklahoma Police Pension and Retirement System claims U.S. Bancorp knew mortgage loans underlying the bonds were not properly transferred to trusts, which caused investors to suffer millions of dollars in losses.
The mortgage loans were pooled and securitized by Bear Stearns, the investment bank that was acquired by JPMorgan Chase & Co. The pension fund claims, as the trustee for the two trusts at issue in the lawsuit, U.S. Bancorp was required to take steps to ensure the securities sold to investors were properly backed by mortgages.
The fund said the bank was required to take physical possession of documents in mortgage-loan files and review the files for any defects. Transfer of the proper documentation was needed for the trusts to take ownership of the loans.
U.S. Bancorp’s failures meant securities purchased by investors “were not, in fact, legally collateralized by mortgage loans,” according to the court filing.
The pension fund filed the complaint as a class-action, and seeks to represent other investors.
The case is Oklahoma Police Pension and Retirement System v. U.S. Bank National Association, No: 11-08066.