Massasuchetts Mutual Life Insurance Co. has filed a lawsuit against Merrill Lynch, Deutsche Bank Securities, Goldman Sachs, JPMorgan Securities, and RBS Securities, according to the Boston Business Journal.

The report said that the suit, which was filed with the U.S. District Court, alleged that the five institutions mislead insurer MassMutual regarding the risks on certificates they underwrote between 2005 and 2007 that were backed by MBS issued by Minneapolis-based Residential Funding Co. (RFC).

The suit stated that RFC originated mortgage loans for securitization and used the banks to sell the securities, according to the Boston Business Journal.

Mass Mutual stated that RFC originated loans from borrowers regardless of their ability to pay, according to the report. The mortgages were usually issued based on overstated incomes, inflated appraisals, untrue employment verifications or originated without the use of prudent underwriting, MassMutual argued.

According to the report, although the certificates that MassMutual bought were supposedly long-term, stable investments, a considerable percentage of the notes are no longer collectible. The suit further alleged that these have resulted in huge losses for the insurance company, the Boston Business Journal reported.

 

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