Mortgage Crisis & Financial Services Watch

Business and legal issues affecting Banking, Finance and Lending | Credit | Securities and Investing | E-Commerce

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Latest from Mortgage Crisis & Financial Services Watch

Mortgage Crisis & Financial Services Watch

CFPB Decision on “GSE Patch” Revives Debate About Prudent Underwriting

By Kenneth Duvall & Philip R. Stein on August 19, 2019

The Consumer Financial Protection Bureau (CFPB) recently announced that it will allow the so-called “GSE patch” to expire in January 2021.[1] This patch permits Government-Sponsored Entities Fannie Mae and Freddie Mac to buy loans even though the borrower’s debt-to-income (“DTI”) ratio exceeds the standard limit of 43%.[2] The CFPB’s decision revives a long-standing debate about what constitutes a creditworthy loan. By eliminating the patch, the DTI ratio of 43% will become an absolute rule, making…

Mortgage Crisis & Financial Services Watch

From RMBS to SLABS: Is History Repeating Itself?

By Philip R. Stein & Kenneth Duvall on April 2, 2019

The fallout from the last financial crisis and recession is far from over. More than a decade after the demise of Lehman and Bear Stearns, among others, litigation continues related to alleged deficiencies in mortgage loans securitized as part of residential mortgage-backed securities (RMBS) offerings. Our firm thus remains extremely busy with, for example, defense of mortgage loan originators and brokers sued for purported breaches of contractual indemnification provisions and representations and warranties — regarding…

Mortgage Crisis & Financial Services Watch

New Second Circuit Statute of Limitations Ruling A Benefit to Loan Originators, Brokers

By Philip R. Stein on February 12, 2019

As originators and brokers of mortgage loans continue to get served with new lawsuits (or threatened with potential suits) related to loans that they conveyed to aggregators prior to the financial crisis of 2008, questions almost inevitably arise as to how this is even possible: aren’t such claims time-barred under the applicable statute of limitations? The answer is more complicated than the originator or broker might have initially thought. It can depend on what state’s…

Mortgage Crisis & Financial Services Watch

New York High Court Rules on Statute of Limitations

By Philip R. Stein & Kenneth Duvall on December 10, 2018

Over the last several years, we have posted several times about whether the statute of limitations bars remedies against lenders (and sometimes sponsors and trustees) of residential mortgages. (See here, here, and here). One of the most important cases in this area has been ACE Sec. Corp., Home Equity Loan Trust, Series 2006–SL2 v. DB Structured Prods., Inc.[1] We had discussed the intermediate appellate court decision in ACE in 2013.…

Mortgage Crisis & Financial Services Watch

Jury, Not Judge, Must Decide Meaning of Representations

By Kenneth Duvall on October 18, 2018

Last month, New York’s intermediate appellate court reversed a grant of summary judgment in favor of plaintiff MBIA Ins. Corp.[1] MBIA, an insurer of RMBS trusts and a common plaintiff in this type of litigation, had sued Credit Suisse, the sponsor of the trusts. The trial court had ruled as a matter of law that a “No Monetary Default” representation and warranty (R&W) encompassed borrower misrepresentation. The trial court also had ruled as a…

Mortgage Crisis & Financial Services Watch

Lehman Brothers Seeks to Expand Lawsuits Against Loan Originators

By Philip R. Stein & Enza G. Boderone on October 11, 2018

Last week, Lehman Brothers Holdings Inc. (“LBHI”) filed two new motions in its ongoing Southern District of New York Bankruptcy Court litigation against approximately 130 loan originators and brokers: (1) an Omnibus Motion for Leave to File Third Amended Complaints Pursuant to Rule 7015 of the Federal Rules of Bankruptcy Procedure (“Motion for Leave to Amend Complaint”); and (2) a Motion for Leave to Amend and Extend the Scope of the Alternative Dispute Resolution Procedures…

Mortgage Crisis & Financial Services Watch

Chase Lets Loose a Barrage of New Indemnification Demand Letters

By Philip R. Stein on April 30, 2018

Ten years after the financial crisis, mortgage companies and regional/local banks are still getting hit with new breach of contract and indemnification claims related to loans sold before the crisis. The latest case in point involves demand letters that JPMorgan Chase is sending out to lenders throughout the country. The letters pertain to loans sold by originators to EMC, Bear Stearns and Chase prior to 2008. Chase then pooled those loans with loans it originated on a…

Mortgage Crisis & Financial Services Watch

A Decade on, Crisis-Era Litigation Still Bedevils Banks

By Philip R. Stein on April 5, 2018

Banks and other financial institutions might reasonably have expected that, 10 years after the collapse of Bear Stearns and the demise of Lehman Brothers, they would finally be free and clear of lawsuits spawned by the financial crisis. That has not come to pass. Nor does freedom from legal actions rooted in the events of that era appear imminent. This circumstance should be seen not just as an annoyance for banks, or another indication of…

Mortgage Crisis & Financial Services Watch

EB-5 Program Extension Allows Developers More Time to Obtain Financing

By Robert M. Siegel on March 27, 2018

Last week H.R.1625 – Consolidated Appropriations Act, 2018 was enacted. The Act includes a continuation of funding, until September 30, 2018, for the EB-5 Regional Center Program. EB-5 financing has been a low cost financing alternative for real estate developers when compared to other capital sources. EB-5 credit facilities are typically structured as staged funding vehicles for pre-vertical costs and expenses. While the projects differ as to concept (eg., high rise, mixed-use, single family, and…

Mortgage Crisis & Financial Services Watch

Lehman RMBS Settlement Likely to Spur Additional Claims

By Philip R. Stein on March 19, 2018

On March 8, the Bankruptcy Court for the Southern District of New York concluded a lengthy “claims estimation” trial to determine the appropriate final settlement price for a resolution of lawsuits filed on behalf of investors in residential mortgage-backed securities (RMBS) created by Lehman Brothers Holdings prior to its bankruptcy in September 2008. The judge determined that the final settlement value of this particular set of claims was $2.38 billion – down from the $37…

Mortgage Crisis & Financial Services Watch

Business and legal issues affecting Banking, Finance and Lending | Credit | Securities and Investing | E-Commerce

Blog Authors

CFPB Decision on “GSE Patch” Revives Debate About Prudent Underwriting

From RMBS to SLABS: Is History Repeating Itself?

New Second Circuit Statute of Limitations Ruling A Benefit to Loan Originators, Brokers

New York High Court Rules on Statute of Limitations

Jury, Not Judge, Must Decide Meaning of Representations

Lehman Brothers Seeks to Expand Lawsuits Against Loan Originators

Chase Lets Loose a Barrage of New Indemnification Demand Letters

A Decade on, Crisis-Era Litigation Still Bedevils Banks

EB-5 Program Extension Allows Developers More Time to Obtain Financing

Lehman RMBS Settlement Likely to Spur Additional Claims

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