Trust Indenture Act

NCUA Sues Deutsche Bank National Trust Co. For Allegedly Failing to Comply With RMBS Trustee Duties

The National Credit Union Administration, acting as liquidating agent for five failed credit unions, sued Deutsche Bank National Trust Company (DBNTC) for allegedly breaching its duties as trustee under the governing trust agreements for 121 RMBS trusts with a total original face value of approximately $140 billion. The complaint, filed November 10, in the U.S. District Court for the Southern District of New York, asserts causes of action under the Trust Indenture Act and a provision of the New York Real Property Law known as the Streit Act. The complaint alleges that DBNTC failed to properly review and monitor the loans underlying the RMBS, notify the investors of deficiencies in the loans, take action to address those alleged deficiencies, and enforce the repurchase of defective loans as provided for in the governing agreements. The complaint also alleges that DBNTC failed to exercise proper oversight over the loans’ servicers, including by failing to declare the servicers and master services in default under the agreements. NCUA seeks unspecified damages, equitable relief, pre- and post-judgment interest, and fees and costs.  Complaint.

Federal Court Dismisses Claims Against Bank of New York Mellon

On April 3, 2012, Judge William H. Pauley of the U.S. District Court for the Southern District of New York dismissed with prejudice nearly all claims against Bank of New York Mellon, as trustee, by four plaintiff pension funds in a putative class action relating to 530 Countrywide RMBS trusts worth $424 billion. Plaintiffs allege that Bank of New York Mellon violated the Trust Indenture Act and breached its contractual and fiduciary duties by failing to remedy the allegedly inadequate servicing of the mortgages underlying the trusts. The court found the plaintiffs lacked standing to bring claims under the Trustee Indenture Act relating to trusts in which they did not actually invest. As a result of the decision, only 26 trusts worth $30 billion remain in the litigation. Decision.

Exemptions for Security-Based Swaps

On March 30, the SEC issued final rules adopting exemptions for certain security-based swaps under the Securities Act (other than the Section 17(a) anti-fraud provisions), the Securities Exchange Act, and the Trust Indenture Act.  Exempt security-based swaps must be issued by certain clearing agencies and satisfy certain conditions.  The final rules are effective April 16.  Final Rules.