Quicken Loans

New York Intermediate Appellate Court Holds that Accrual Provision Does Not Save RMBS Trustee’s Time-Barred Putback Claim

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On August 11, 2016, the First Department of the Appellate Division of the Supreme Court of the State of New York affirmed dismissal of an action brought by Deutsche Bank National Trust Company, as RMBS Trustee, against Quicken Loans, Inc. Following the New York Court of Appeals decision in the closely-followed case of ACE Securities Corp., Home Equity Loan Trust, Series 2006-SL2 v. DB Structured Products, Inc. (covered here) – which held that a breach of contract claim in an RMBS putback action accrues on the date the representations and warranties are made – the First Department concluded Deutsche Bank’s action was time-barred, notwithstanding the presence of an accrual provision in the transaction documents that might have otherwise delayed the accrual of putback claims indefinitely. The decision holds that such accrual provisions are unenforceable attempts to extend the statute of limitations. Order.

Trustee’s Repurchase Suit Against Quicken Loans Dismissed as Time-Barred

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On August 4, Judge Paul A. Crotty of the Southern District of New York granted Quicken Loans’ motion to dismiss a lawsuit brought by Deutsche Bank National Trust Co. (as Trustee of the GSR 2007-OA1 trust), alleging that Quicken breached its obligation to repurchase defective mortgage loans.  Following the First Department’s decision in ACE Securities, Judge Crotty held that the six year statute of limitations for breach of contract began to accrue when Quicken allegedly breached the representations and warranties at issue�at the time the loans were sold�not when the Trustee demanded repurchase.  He rejected the plaintiff’s argument that the lawsuit was timely because the contract at issue included a so-called “accrual” provision, which specified that the Trustee’s cause of action for repurchase would accrue upon (1) notice of breach (2) failure to cure the breach and (3) Plaintiff’s demand for cure.  The court held that the accrual provision could not alter the six-year limitations period because parties cannot agree in advance to extend the statute of limitations before any claims have accrued.  Opinion and Order.