DBSP

Repurchase Suits to Proceed Against DB Structured Products

On March 20, Judge Alison J. Nathan of the United States District Court for the Southern District of New York granted in part and denied in part DB Structured Products, Inc.’s, (DBSP) motions to dismiss four lawsuits brought by HSBC Bank as trustee of four different residential mortgage securitization trusts.  The court dismissed the trustee’s claims for a declaration that DBSP is required to reimburse the trustee for expenses incurred in enforcing its remedies under the relevant contracts, including costs and attorney’s fees, on the basis that the trustee could seek such reimbursement without the need for declaratory relief.  The court denied DBSP’s motion to dismiss the trustee’s breach of contract claims for failure to comply with the contractual requirements for a demand to repurchase allegedly breaching loans, holding that DBSP’s discovery of breaches of representations and warranties was adequately pleaded and provided a sufficient basis for the claims to proceed without evaluating the sufficiency of such demand.  The court also allowed claims for damages to proceed.  Order.

Deutsche Bank Affiliate Sued for Breach of MBS Warranties

On May 29, 2012, the Federal Housing Finance Agency (“FHFA”), acting as conservator for Freddie Mac, filed a summons with notice in New York state court against DB Structured Products. The FHFA purports to sue derivatively on behalf of the Trustee of a particular RMBS trust that issued certificates purchased by Freddie Mac. The FHFA alleges that DBSP breached its contractual representations and warranties concerning the underlying mortgage loan originators’ compliance with underwriting guidelines, the absence of errors or fraud in the origination process, the loans’ compliance with federal, state, and local laws, the accuracy of loan-level data provided to rating agencies, and other loan-related characteristics. The FHFA seeks specific performance of DBSP’s repurchase obligations under the relevant contracts. Summons.