HSBC Stands Accused Of Breach of Contract And Concealing Defective Mortgage Loans In 283 trusts.

On Monday, U.S. District Judge Shira Scheindlin ordered HSBC Holdings to face three lawsuits accusing it of breaching its duties as a trustee overseeing residential mortgage-backed securities that suffered more than $34 billion of losses in the global financial crisis.

The plaintiff investors include some of the biggest hedge funds in the RMBS.  BlackRock, Allianz SE’s Pacific Investment Management and TIAA-CREF are accusing HSBC of breach of contract and concealing known defects in mortgage loans contained in 283 trusts.

In her 53 page decision, Scheindlin wrote:

Based on plaintiffs’ detailed allegations, it is indeed plausible to infer that HSBC had actual knowledge of breaches in representations and warranties in the specific loans at issue. How HSBC gained this actual knowledge, or whether in fact it had actual knowledge, may be determined through discovery.

The judge also said the plaintiffs could pursue a conflict of interest claim accusing the London bank of refusing to “rat out” misconduct by loan servicers.