Barclays, RBS, Goldman sued over US mortgages

Barclays, Royal Bank of Scotland and Goldman Sachs are among the top banks being sued for $2.2bn (£1.3bn) by the trustee for Thornburg Mortgage Inc, the bankrupt US lender.

The court-appointed trustee, Joel Sher, blames the banks for the mortgage lender's failure during the financial crisis. Mr Sher, a top Maryland lawyer, has filed four lawsuits against some of the world's leading banks.

The most extensive lawsuit alleges that a "collusive" arrangement by divisions of JPMorgan, Citigroup, RBS, Credit Suisse and UBS drove Thornburg to bankruptcy.

Mr Sher accuses the five banks of acting together to use a series of unjustified margin calls on their loans to Thornburg to increase their control over the company.

He further alleges they used "market disruption as a justification to initiate a collusive scheme to take control of the debtors and eventually drive them into bankruptcy".

The banks extracted more than $700m of margin and interest payments from Thornburg, then sold their collateral and left the company to file for Chapter 11 bankruptcy during the credit crisis in May 2009, Mr Sher claims.

The lawsuit seeks to recover $2bn for fraudulent conveyances and transfers by the banks, which financed Thornburg's mortgage-backed securities. The trustee claimed the banks eventually drove Thornburg into Chapter 11 bankruptcy.

The company sought protection from creditors with $36.5bn in assets, making it one of the biggest bankruptcies during the financial crisis.

The trustee also sued Barclays for at least $94m for allegedly improperly seizing mortgage bonds from Thornburg in 2007 by undervaluing the securities in a series of margin calls on the company. In addition, Mr Sher sued Goldman Sachs for at least $71m, accusing the investment bank of plotting to seize hundreds of millions of dollars worth of investment-grade mortgage bonds that Thornburg had pledged to it as collateral.

Thornburg, which is now known as TMST Inc, was one of the biggest casualties of the US housing collapse.

The Santa Fe-based lender specialised in making so-called jumbo loans of more than $400,000 to affluent or rich property buyers with good credit, but collapsed following margin calls by its lenders because it was unable to sell assets or raise fresh funds. Margin calls force the borrower to repay loans or put up more collateral as security for the borrowings.

Citi said the lawsuit against it was meritless. Credit Suisse, UBS, Barclays and Goldman declined to comment. JPMorgan in the US did not return a call but told Reuters the lawsuit was meritless.

The final lawsuit claims Countrywide Home Loans, which was acquired by Bank of America, breached representations and warranties on the loans it sold to a Thornburg business. Bank of America declined to comment.

Mr Sher was appointed to run Thornburg after the company's executives were accused of using Thornburg's staff and offices without creditors' approval to start a new company.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003