Wells Fargo Bank and Deutsche Bank sued Richmond in one federal lawsuit, and The Bank of New York Mellon sued the city in a separate, similar complaint.
The banks claim the city's homeowner-rescue plan will cost the banks and their investors tens of millions of dollars.
Wells Fargo Bank and Deutsche Bank, in their capacities as trustees for hundreds of mortgage securities trusts, sued Richmond and Mortgage Resolutions Partners (MRP) to try to stop the City Council from implementing its "elaborate profit-driven scheme."
The Bank of New York Mellon, also as a trustee, sued Richmond, MRP, and Gordian Sword, a Delaware LLC.
"Following a scheme devised by a mortgage investment firm that stands to profit handsomely from the deal, the City of Richmond has made clear that it imminently plans to seize residential mortgages - mortgages that are current on their payments - at deep discounts and then refinance the properties at reduced loan values," Bank of New York Mellon says in its complaint. "The borrowers would retain their homes with a lower debt load. The city and the investment firm each would receive certain fees generated by the refinancing transactions, and then the firm and its investors would profit from reselling federally guaranteed loans.
"And the trusts and their investors, including pension funds and other institutional investors, who held current, performing loans that had financed the purchase of the homes in the City would be left holding the bag, losing tens of millions of dollars in loan principal."
