Guaranty Bank RMBS Lawsuits Dismissed As Time-Barred
Judge Sam Sparks of the United States District Court for the Western District of Texas granted judgment to defendants in two related cases filed by the FDIC on behalf Guaranty Bank (now defunct) arising out of Guaranty Bank's purchases in 2004 and 2005 of US$2.1 billion in RMBS. Defendants Goldman Sachs, Deutsche Bank, Merrill Lynch and RBS Securities sought judgment on the pleadings that the FDIC's claims were time barred under the Texas Securities Act's five-year statute of repose. The court agreed, holding that under the Supreme Court's recent decision in CTS Corp. v. Waldburger the FDIC Extender Statute did not preempt the Texas statute of repose. Goldman/DB Order. Merrill/RBS Order.
Goldman Reaches Settlement with FHFA
On August 22, Goldman Sachs and FHFA announced a US$3.15 billion settlement of claims brought by FHFA against Goldman in two separate lawsuits related to RMBS purchased by Fannie Mae and Freddie Mac between 2005 and 2007. FHFA, as conservator for Fannie Mae and Freddie Mac, asserted claims for violations of federal and state securities law on the basis of alleged material misrepresentations or omissions in the offering documents for the RMBS sold to Fannie Mae and Freddie Mac. As part of the settlement, Goldman is repurchasing most of the RMBS at issue. Goldman did not admit any liability or wrongdoing as part of the settlement. Fannie Mae Agreement. Freddie Mac Agreement.
Breach of Contract Claims against J.P. Morgan and EMC Dismissed as Time-Barred
On August 19, in an oral ruling from the bench, Vice Chancellor J. Travis Laster of the Delaware Chancery Court dismissed as time-barred loan repurchase claims brought by U.S. Bank as trustee of an RMBS trust against JPMorgan and EMC Mortgage. U.S. Bank alleged that EMC misrepresented the quality of more than US$500 million worth of mortgages that were sold to the trust in 2006 and that both EMC and JPMorgan, which took over as the servicers of the trust in 2011, failed to notify the trustee of the faulty loans. Vice Chancellor Laster, following the Delaware Chancery Court's 2012 decision in Central Mortgage Co. v. Mortgage Stanley Capital Holdings LLC., held that Delaware's three-year statute of limitations for breach of contract claims began to run on the day the allegedly false representations were made. He held that the contract's accrual provision could not extend the statute of limitations and that no other tolling doctrines applied to render plaintiff's claims timely. He also held that the alleged failure to notify claim was derivative of the underlying claim for breach of representation and subject to the same limitations period. Vice Chancellor Laster did not dismiss U.S. Bank's claims for unjust enrichment and failure to provide documents, finding them well pled and not time barred. Hearing Transcript.
Bank of America and U.S. Bank Reach Settlement With Investors
On August 18, Judge Katherine Forrest of the United States District Court for the Southern District of New York terminated a pending motion for class certification in light of a settlement in principle reached between a class of RMBS investors and Bank of America N.A. and U.S. Bank N.A., the trustees for the RMBS trusts. Plaintiffs had alleged that Bank of America and U.S. Bank allowed incomplete or defective loan files as well as loans with underwriting errors to remain in the loan pool, despite their statutory duty as trustees to have such loans repurchased from the trusts. The amount and terms of the settlement were not disclosed. Order.
RBS Settles MBS Claims with Assured
On August 14, RBS Securities reached a deal with Assured Guaranty Municipal Corp. to settle a lawsuit alleging misrepresentations concerning the collateral underlying a US$291 million securitization. The complaint alleged that Assured anticipated paying US$100 million in claims pursuant to the monoline insurance policy it issued in connection with the securitization. In light of the settlement, Judge Ronnie Abrams of the United States District Court for the Southern District of New York dismissed Assured's suit with prejudice, with the stipulation that Assured may restore the suit within 30 days if the settlement is not finalized. The amount and terms of the settlement were not disclosed. Order.