Mr. Beal’s CXA Corp. ran a pair of advertisements late last year, one appearing in The Wall Street Journal. The ads listed an alphabet soup of residential mortgage-backed securities held by CXA and asked those with positions in the same securities to join the company in investigating possible infractions by banks that sold the debt.
If the groups can prove the mortgages that underlie the bonds were approved through shoddy underwriting, they could be entitled to compensation—CXA’s payday alone could be tens of millions of dollars.
To have a chance at prying money from the banks, CXA needs to gather investors holding 25% of the voting rights in an outstanding issue. The investors can then try to get banks to buy back any loans they say are faulty, for example for misrepresenting the quality of the borrowers.
Mr. Costas says the firm has signed on enough investors in seven of the 93 mortgage-backed securities held by its CXA Corp. unit to take action. He declined to identify those investors who had joined the group.
Sellers of the bonds include units of Bank of America Corp., BAC -1.25% Deutsche Bank AG, DBK.XE +0.93% Citigroup Inc., C -1.10% Goldman Sachs Group Inc.,GS -0.05% Morgan Stanley MS -1.32% and J.P. Morgan Chase JPM -0.85% & Co. Representatives at these firms declined to comment.
And here was the advertisement:
CXA Advertisement in Wall Street Journal Recruits Fellow RMBS Investors for Investigation of Rep & Warranty Breaches
By Structured Finance Litigation Team on November 8th, 2012Posted in Beal Bank, Citigroup, CXA Corporation, Goldman Sachs, Institutional Investors, Investment Banks/Deal Sponsors, Morgan Stanley, Washington Mutual