Class Shut Out of HSBC’s Spat with Fed Regulators

MANHATTAN (CN) - A proposed homeowner class is too late and has no grounds to join a lawsuit that the Federal Housing Finance Agency filed against HSBC and other banks over securities fraud claims related to the 2008 financial crisis, a federal judge ruled.

HSBC was one of the 17 financial institutions that the federal regulatory agency hit with lawsuits for allegedly causing billions in losses by lying about worthless mortgage-backed securities.

Although the cases were filed in September 2011, homeowner Roger Mauermann moved into intervene this year on behalf a proposed class of all borrowers who had to foreclose on mortgages backed by these toxic securities.

On Monday, U.S. District Judge Denise Cote dismissed his case, in part, because of delay.

"Mauermann waited nearly three years, until the eve of trial, to make this motion," she wrote in a six-page opinion.

With trial currently slated for Sept. 29, "prejudice to the existing parties would be extreme" if she inserted Mauermann's class into the case, Cote found.

In addition, Mauermann's claims "chiefly concern alleged fraudulent and predatory lending practices by non-party originators, as opposed to the false statements in HSBC's offering documents FHFA alleges here," she noted.

"Although Mauermann's mortgage loan happens to be one of those securitized by HSBC in the [residential mortgage-backed securities] at issue here, Mauermann's claims have no place in this litigation," the opinion states.

Mauermann's lawyer William Sanchez-Calderon said in a phone interview that he has not decided whether he is going to appeal or ask Cote to reconsider her decision in light of the looming trial.

But Sanchez said his client may have another legal option.

"We are considering filing an independent action against HSBC," he told Courthouse News.

The Federal Housing Finance Agency's lawyers declined to comment.

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