If your eyes glaze over at more news of mortgage-backed securities litigation, you may have missed an important wrinkle in Tuesday's suit against Bank of America for breaching representations and warranties about the mortgages underlying Greenwich Financial's Harborview MBS offerings. The 50-page New York state supreme court complaint was filed by Quinn Emanuel Urquhart & Sullivan, which represents a ton of MBS investors. But the Harborview suit wasn't filed on behalf of an investor: Quinn brought the suit for U.S. Bank National Association, the securitization trustee in the Harborview offerings at issue.

That's right: A securitization trustee has actually sued a mortgage lender to demand the lender buy back allegedly-deficient loans. That happens about as often as an unseeded tennis player wins the U.S. Open. Securitization trustees, in fact, are at the center of an investigation by New York attorney general Eric Schneiderman and Delaware AG Joseph Biden III, who are looking for evidence that MBS trustees failed investors by not policing the underlying mortgage loans. Those allegations are at the heart of the fraud counterclaims Schneiderman's office has asserted against Bank of New York Mellon, the Countrywide MBS trustee seeking court approval of BofA's proposed $8.5 billion deal with noteholders.

Countrywide and BofA didn't issue the Harborview mortgage-backed notes at issue in the new U.S. Bank suit. They were offered by Greenwich Financial. Countrywide, however, supplied Greenwich with the underlying mortgage loans that the trustee now claims weren't up to snuff. Interestingly, the U.S. Bank complaint doesn't name Greenwich as a defendant. That's because of the nature of the claims. The complaint isn't claiming securities fraud or misrepresentation in offering documents. It's asserting that under the pooling and servicing agreements between Countrywide and Greenwich, Countrywide is obliged to buy back underlying loans that don't live up to Countrywide's representations and warranties. In a way, the trustee is acting on Greenwich's behalf for the benefit of Harborview noteholders.

Not that Harborview noteholders view Greenwich as their friend and savior. You may recall that Harborview MBS investors represented by Cohen Milstein Sellers & Toll filed a securities class action against Greenwich and several other defendants in Manhattan federal court in 2008. (The class action involved different Harborview offerings than those in the U.S. Bank case, but the allegations of deficient underlying loans are the same.) Last January, Judge Harold Baer Jr.refused to certify the class action. That ruling is now before the U.S. Court of Appeals for the Second Circuit. 

Joel Laitman of Cohen Milstein, who's representing the Harborview MBS investors at the Second Circuit, said U.S. Bank's suit may presage a wave of litigation by MBS securitization trustees attempting to enforce put-back provisions against mortgage lenders. Trustees are under increased pressure because of the regulatory investigations. Moreover, as Laitman noted, the statute of limitations is beginning to be a problem for investors with securities claims related to offerings from three or more years ago. The securitization trustees' breach of contract claims, on the other hand, are running on a different clock.

Quinn Emanuel declined comment on the U.S. Bank complaint. A BofA spokesman said the bank is reviewing the complaint and doesn't have a comment. A U.S. Bancorp spokesman said only that the company filed the suit at the behest of investors in its role as trustee.

(Reporting by Alison Frankel)

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