A US judge rejected bids by Goldman Sachs Group Inc and Deutsche Bank AG to dismiss a federal regulator's lawsuits accusing them of misleading Fannie Mae and Freddie Mac into buying billions of dollars of risky mortgage debt.
In separate decisions on Monday, U.S. District Judge Denise Cote in Manhattan said the Federal Housing Finance Agency may pursue fraud claims over some of the banks' representations in offering materials regarding mortgage underwriting standards.
The FHFA had sued over certificates that Fannie Mae and Freddie Mac, known as government-sponsored enterprises, had bought between September 2005 and October 2007.
Goldman underwrote about $11.1 billion of the certificates, and Deutsche Bank roughly $14.2 billion, the regulator has said.
Michael DuVally, a Goldman spokesman, declined to comment, as did Deutsche Bank spokeswoman Renee Calabro. Trials in both cases are scheduled to begin in September 2014.
Last year, the FHFA filed 18 lawsuits against banks and finance companies over mortgage losses suffered by Fannie Mae and Freddie Mac on roughly $200 billion of securities.
Cote handles 16 of the lawsuits, and previously refused to dismiss its cases against Bank of America Corp's Merrill Lynch unit, JPMorgan Chase & Co and UBS AG.
In her Deutsche Bank ruling, the judge said that while the offering materials said representations were preliminary and subject to change, their use suggested that the German bank fully intended the GSEs to rely on them.
Meanwhile, Cote rejected what she called Goldman's legally dubious claim not to be liable over prospectus supplements it did not write, saying it is difficult to square with the fact that the bank's name is prominently displayed on each.
She dismissed some claims over representations concerning owner-occupied homes and loan values.
The FHFA became the conservator of Fannie Mae and Freddie Mac after federal regulators seized the mortgage financiers on Sept. 7, 2008.
In May, Deutsche Bank agreed to pay $202.3 million in a separate federal probe, in which its MortgageIT unit admitted it had lied to the U.S. government over whether its loans were eligible for federal mortgage insurance.
Cote said it is too soon to decide liability over MortgageIT activity that predated its 2007 takeover by Deutsche Bank.
The cases are Federal Housing Finance Agency v. Deutsche Bank AG et al, U.S. District Court, Southern District of New York, No. 11-06192; and Federal Housing Finance Agency v. Goldman Sachs & Co et al in the same court, No. 11-06198.