NatWest has filed a lawsuit against a former mortgage finance company, which was backed by General Motors, for more than 155 million euros over faulty securitization deals completed before the financial crisis.

The High Court in London heard a case last week brought by the British bank against CMIS, which was originally part of GM when the US auto company ventured into mortgage financing.

The dispute concerns agreements that ABN Amro — the Dutch bank that was acquired by a consortium led by the Royal Bank of Scotland in 2007, which has since been renamed NatWest — entered into with CMIS under its former name General Motors Acceptance Corp.

The transactions were developed to manage the financial risks that GMAC faced in the securitization of residential mortgages it had issued in the Netherlands and Germany.

Homeowners who had taken out mortgages paid a fixed interest rate on their loans, which were bundled between 2006 and 2008 and sold to investors as variable-rate securities.

In light of the financial risk of a "cash flow mismatch" — and to secure coveted AAA ratings from credit rating agencies for the securities — GMAC entered into interest rate swap agreements with ABN Amro.

As part of the hedging business, the two parties agreed on "compensation agreements," under which NatWest claimed that payments were due to them.

The lawyers of NatWest, however, complained to the court during the two-day hearing last week that CMIS "has not paid any due amounts since 2017" after making the payments for about a decade.

Jonathan Davies-Jones KC, who represents the British bank, said in written statements that the "real explanation" for CMIS's "volte-face" is a "significant increase" in the required payments under the deal.

GMAC granted approximately 10 billion euros in Dutch mortgages between 2000 and 2008, but ceased the sale of new mortgages during the crisis, according to court documents.

GMAC, which was rescued by the US government during the crisis, sold its European mortgage business in 2010 to funds managed by Fortress Investment Group.

Tom Smith KC, for CMIS, said in written arguments that CMIS was "practically in a state of liquidation" and "by far did not have sufficient funds to pay the amounts demanded by NatWest." The bank is demanding 155 million euros plus interest.

Smith said, "no one has been able to provide any meaningful evidence" as to why the first compensation agreement was concluded in 2006.

He added that the agreement was made "at the height of the securitization bubble, right before the global financial crisis.

The agreement was signed by executives at General Motors and ABN Amro, both of which notoriously collapsed during the crisis. The protagonists have since moved on, and one can only imagine what behind-the-scenes machinations took place.