Pacific Investment Management Co. (Pimco) and other investors have sued Citigroup over the bank’s alleged failure in relation to oversight of billions of dollars of mortgage-backed securities, Reuters reported.
The bank has been accused of failing to properly monitor toxic securities backed by more than US$13.8 billion of mortgage loans, resulting in US$2.3 billion of losses, the report said.
According to a complaint filed in a New York court late Tuesday, Citigroup breached its duties as trustee for 25 private-label trusts dating from 2004 to 2007 by ignoring “pervasive and systemic deficiencies” in how the underlying loans were underwritten or being serviced.
The bank looked askance at the loans’ “abysmal performance” out of fear it might “jeopardize its close business relationships” with loan servicers such as Wells Fargo and JPMorgan Chase, or prompt them to retaliate over its own problem loans, the investors said.
Some loans backing the 25 trusts came from issuers including the now-defunct American Home Mortgage and Washington Mutual.
The lawsuit seeks class-action status and unspecified damages.
TIAA-CREF and affiliates of Prudential Financial and Transamerica are among the other plaintiffs, according to the report.
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