BNP Paribas, Deutsche Bank sue Bank of America

AP News
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Posted: Nov 25, 2009 6:08 PM

Deutsche Bank AG and a BNP Paribas unit sued Bank of America NA on Wednesday over allegations the bank failed to pay back $1.73 billion in secured notes.

The two sued for breach of contract.

Deutsche Bank said Bank of America failed to secure $1.25 billion in cash and mortgage loans on its behalf. BNP Paribas said the bank was supposed to hold cash and mortgage loans to secure $480.7 million in oustanding notes.

The notes were issued by a special-purpose entity, Ocala Funding LLC, which provided short-term loans to Taylor, Bean & Whitaker Mortgage Corp. The two plaintiffs say that once Taylor Bean was delisted as a seller of mortgages to Freddie Mac in August, Bank of America was required to pay back the notes.

Bank of America spokesman Bill Halldin said BNP's and Deutsche Bank's effort to hold Bank of America responsible is misguided.

"We fulfilled our contractual obligations in our limited administrative role with respect to the Ocala facility, and will vigorously defend ourselves in court," he said in a statement.

Halldin said the bank has been actively trying to recover funds in the bankruptcies of Taylor Bean and Colonial BancGroup Inc., which served as a bank for deals done by Taylor Bean and Ocala. Bank of America sued Colonial in August over $1 billion in assets. Colonial filed for bankruptcy protection in August.

BNP Paribas Mortage Corp., based in New York, also accused Bank of America of falsely showing that it held far more in collateral than it actually did, leading BNP to buy even more notes.

Parent company BNP Paribas is based in Paris. Deutsche Bank is based in Frankfurt, Germany.

The lawsuits were both filed in the U.S. District Court in Manhattan.

Shares of Bank of America, based in Charlotte, N.C., fell 15 cents to $15.95 on Wednesday.