On November 1, U.S. Bank National Association, acting in its capacity as trustee for Citigroup Mortgage Loan Trust 2007-AHL2, filed a lawsuit in the Supreme Court for the State of New York against Citigroup Global Markets Realty Corp. (Citigroup), on behalf of and at the direction of a holder of certificates issued by the trust. The trustee alleges, inter alia, that Citigroup breached its obligations arising under the Mortgage Loan Purchase Agreement (MLPA) and Pooling and Servicing Agreement for the deal. In particular, the trustee alleges that certain of the mortgage loans backing the certificates did not comply with the representations and warranties made in the MLPA, and that Citigroup failed to cure or repurchase those mortgage loans. The trustee seeks rescissory and compensatory damages and/or an order requiring Citigroup to repurchase the loans at issue. Summons.
Supreme Court for the State of New York
Bank of America’s Motion to Consolidate Actions by Bond Insurers Denied
On October 31, 2011, Justice Bransten of the Supreme Court for the State of New York denied Bank of America’s (“BofA”) motion to split the successor liability claims from four separate lawsuits pending against the bank and consolidate those claims into a single case. Four monoline insurers that insured Countrywide mortgage-backed securities – MBIA Inc., Syncora Guarantee Inc., Ambac Assurance Corp., and Financial Guaranty Insurance Co. – have sued BofA and Countrywide for fraud and breach of contract. BofA argued that the nearly identical successor liability claims in the four suits should be severed from the individual cases, consolidated, and stayed until after primary liability is decided. Justice Bransten agreed the claims were similar but found severance and consolidation would prejudice MBIA, the first to file suit, by unduly delaying its claims while the other insurers conduct discovery. Decision.
U.S. Bank Sues Bank of America Over $1.75 Billion Countrywide RMBS Deal
On August 29, 2011, U.S. Bank National Association (“U.S. Bank”) filed a lawsuit against Bank of America and certain affiliates, as successor to Countrywide Financial Corp., in the Supreme Court for the State of New York. U.S. Bank, as Trustee of the RMBS transaction, filed this suit at the direction of trust investors, in order to force Bank of America to repurchase each of the securitized loans underlying the trust. The complaint alleges that Countrywide failed to adhere to its own underwriting guidelines and thus misrepresented the quality of the loans underlying the trust. The complaint further alleges that it notified Bank of America of the need to cure or repurchase the loans beginning on May 2, 2011. U.S. Bank alleges that to date Bank of America has neither repurchased any loans nor provided an explanation for the failure to do so. U.S. Bank brings claims for breach of contract and a declaratory judgment that Bank of America is required to repurchase all of the allegedly defective loans in the mortgage pool. Complaint.