District Court Denies Banks’ Motions to Dismiss Litigation Concerning Role of MBS Trustees

more+
less-

On May 6, Judge Katherine Forrest of the United States District Court for the Southern District of New York denied Bank of America and U.S. Bank’s motions to dismiss an action relating to their roles as trustees of Washington Mutual mortgage-backed securities. Plaintiffs, including the Policemen’s Annuity and Benefit Fund of Chicago and other entities, claimed the trustees failed to notify certificate-holders of breaches of the Pooling and Servicing Agreements relating to the completeness of mortgage files and compliance with loan underwriting guidelines. The court held the Trust Indenture Act plausibly applies to the securities at issue and requires trustees to provide notice of all defaults known to it within ninety days. The court also held that Plaintiffs adequately pleaded that defaults occurred, such as the failure of certain entities to correct flaws in the mortgage files, and that defendants plausibly knew that certain representations in the Pooling and Servicing Agreements had been breached. Judge Forrest noted that Plaintiffs must ultimately prove that the trustees had actual, rather than constructive, knowledge of the alleged breaches and that the existence of even pervasive practices is not necessarily sufficient evidence of actual knowledge. Order.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Orrick - Structured Finance Group | Attorney Advertising

Written by:

more+
less-

Orrick - Structured Finance Group on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
×
Loading...
×
×