On July 23, 2013, a federal court in New York allowed HSBC Bank USA to proceed with a putback lawsuit against DB Structured Products Inc. (DBSP), a unit of Deutsche Bank AG, in connection with approximately $640 million in residential mortgage-backed securities (RMBS). HSBC, acting as trustee for Deutsche Alt-A Securities Mortgage Loan Trust, filed its lawsuit in November 2012, alleging that DBSP misrepresented the quality of 1,513 residential mortgage loans that it purchased and securitized in 2006. According to HSBC’s complaint, at least 323 of the loans underlying the RMBS contained misleading documentation concerning borrowers’ debt obligations, owner-occupancy rates, homeowners’ debt-to-income ratios, and employment status of borrowers. DBSP moved to dismiss on the grounds that, inter alia, HSBC was trying to sue for breaches of representations and warranties without providing sufficient prior notice, and that the pooling and servicing agreement (PSA) limited remedies to a loan-by-loan repurchase. In denying most of DBSP’s motion to dismiss, U.S. District Judge Robert W. Sweet found that HSBC “more than complied with the minimal notice requirements in the Agreements” and DBSP’s failure to repurchase or cure despite receiving breach notices was sufficient to establish a breach of contract claim. Judge Sweet further ruled that monetary damages would be an appropriate remedy because many of the disputed loans had already been liquidated or foreclosed. The case is Deutsche Alt-A Securities Mortgage Loan Trust v. DB Structured Products, Inc., case number 12-cv-08594, in the U.S. District Court for the Southern District of New York. Read the opinion here.