Federal Deposit Insurance Corp v. Citibank | lost more than $200 million when selling $420 million of the Guaranty securities (SAMI 2007- AR6)
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR GUARANTY BANK Plaintiff, -against- CITIBANK N.A., DefendantNATURE OF ACTION
1. This is an action for damages against Citibank for its breaches of contractual and statutory duties under the governing agreements, the New York Streit Act, N.Y. Real Property Law § 124, et seq. (the “Streit Act”), and under the federal Trust Indenture Act of 1939 (the “TIA”), 15 U.S.C. § 77aaa, et seq.1 as Trustee for Structured Asset Mortgage Investments II Trust 2007-AR6 Mortgage Pass-Through Certificates (“SAMI 2007-AR6” or the “Covered Trust”) securitization trust, which issued residential mortgage-back securities (“RMBS”) purchased by investors, including Guaranty Bank (“Guaranty”). 2. This action seeks to hold Citibank accountable for abdicating its fundamental duties as the trustee for certificateholders such as Plaintiff. Under the agreements governing the Covered Trust, Citibank accepted virtually all of the powers designed to protect the certificateholders and was compensated for that role. Citibank was essentially Plaintiff’s sole source of protection against breaches of the governing agreements by the other parties to those agreements, including the sponsor that sold the loans to the Covered Trust and the servicers tasked with servicing the mortgage loans. Citibank, however, shirked its duty to exercise its powers to protect Plaintiff and instead attempted to shorn itself of the responsibilities that trusteeship imports. While Citibank stood idly for years, the sponsor kept defective mortgage loans in the Covered Trust, servicers reaped excessive fees for servicing the defaulted loans from the Covered Trust, and Plaintiff was left to suffer enormous losses. 3. The Covered Trust was sponsored by EMC Mortgage Corporation (“EMC” or the “Sponsor”) and backed by loans originated by American Home Mortgage Corp. (“AHM” or the “Originator”). 4. Prior to its failure, Guaranty purchased the RMBS certificate SAMI 2007- AR6 1A2 with an original face value of $420,046,000 (the “Certificate”) [...]