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Dutch pension fund sues Credit Suisse over toxic RMBS

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Dutch pension fund Stichting Pensioenfonds ABP filed suit against banking giant Credit Suisse (CS: 23.48 0.00%), claiming the global bank sold the fund residential mortgage-backed securities without disclosing the toxic nature of the mortgages serving as collateral.

The suit, which does not mention how much the fund purchased, claims the pension fund is one of the three largest of its kind in the world.

In its complaint, the fund, which is based in the Netherlands, claims Credit Suisse made false and misleading statements about the RMBS it sold to the fund and failed to note the fact that many of the borrowers were not creditworthy based on the types of loans they obtained.

The securities were either originated through Credit Suisse or purchased through third-party originators.

Credit Suisse declined to comment on the suit Friday.

Stichting Penioenfonds claims in the complaint that Credit Suisse knew many of the loans had major underwriting faults and even demanded compensation from third-party originators for failing to follow accurate underwriting guidelines. However, the plaintiff claims that after obtaining compensation, Credit Suisse never passed the funds recovered to the trusts that held the loans or to RMBS investors.

Instead, the fund claims Credit Suisse left the loans in their securitization pools and resold the loans back to the originators while also buying them back at a lower price. Even though this process helped the bank retrieve some of its losses, the pension fund says those savings were never passed on to investors.

Write to Kerri Panchuk.


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