Bank of America Corp.’s Merrill Lynch unit must face a lawsuit filed by two trusts that hold and administer mortgages on behalf of investors who own more than $1 billion worth of securities collateralized by the loans, Bloomberg News reported on Friday. The trusts sued Merrill Lynch Mortgage Lending Inc. in New York State Supreme Court in December, seeking to force it to repurchase loans that allegedly didn’t conform to representations and warranties about their quality and characteristics. In 2006, Merrill bought more than 6,000 mortgages with an original principal balance of more than $1.1 billion from a third-party loan originator, ResMAE Mortgage Corp., then turned them into tradeable securities that were sold to investors, according to the complaint. After ResMAE filed for bankruptcy in February 2007, the trusts pursued claims against ResMAE in bankruptcy through LaSalle Bank, demanding that it buy back loans on which borrowers had missed their first or second payments or provide other compensation, according to the complaint. LaSalle settled those claims in July 2008 on behalf of five Merrill-sponsored trusts, including the two plaintiffs in the suit.
