N.Y. Federal Court Allows RMBS Trustee Suit Against GE Mortgage to Proceed

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On January 14, Judge Katherine B. Forrest of the United States District Court for the Southern District of New York denied a motion for judgment on the pleadings in an action brought by the Bank of New York Mellon as Trustee for GE-WMC Mortgage Securities Trust 2006-1 against GE Mortgage and WMC Mortgage. Judge Forrest rejected the argument that, as a matter of law, the Pooling and Servicing Agreement (PSA) limited the Trustee’s remedies for breaches of representations and warranties to WMC Mortgage only, because this interpretation conflicted with the contemporaneous agreements signed between the parties as well as the PSA itself. Instead, the Court held that the PSA was ambiguous regarding which entities the Trustee could assert claims against, and accordingly the Trustee’s action against GE Mortgage was not barred by the agreement. Decision.