WMC Mortgage

WMC Settles $1 Billion RMBS Suit During Pendency Of Appeal

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On August 9, 2016, RMBS trustee Deutsche Bank National Trust Company and WMC Mortgage, LLC, filed a joint motion to stay an appeal pending in the Court of Appeals for the Second Circuit. The parties requested the stay to allow them time to finalize the settlement of a lawsuit alleging that WMC misrepresented the quality of loans it sold in a $1 billion 2006 RMBS offering. The trial court had previously dismissed the lawsuit in 2015 (covered here) as time-barred under New York’s six-year statute of limitations. Joint Motion.

New York Appellate Court Holds Repurchase Demand Analysis Is Not Protected Work Product

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On June 23, 2016, the First Department of the Appellate Division of the Supreme Court of the State of New York decided an appeal in an action brought by Bank of New York Mellon, as RMBS Trustee, against WMC Mortgage and JP Morgan. In its decision, the Court held that originator WMC’s repurchase demand analysis is not protected work product because it was not primarily prepared in anticipation of litigation and was a regular part of the loan originator’s business. The court therefore affirmed the decision of the trial court, Justice Shirley Werner Kornreich, ordering WMC Mortgage to produce the repurchase demand analysis. Order.

N.Y. Federal Court Allows RMBS Trustee Suit Against GE Mortgage to Proceed

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On January 14, Judge Katherine B. Forrest of the United States District Court for the Southern District of New York denied a motion for judgment on the pleadings in an action brought by the Bank of New York Mellon as Trustee for GE-WMC Mortgage Securities Trust 2006-1 against GE Mortgage and WMC Mortgage.  Judge Forrest rejected the argument that, as a matter of law, the Pooling and Servicing Agreement (PSA) limited the Trustee’s remedies for breaches of representations and warranties to WMC Mortgage only, because this interpretation conflicted with the contemporaneous agreements signed between the parties as well as the PSA itself.  Instead, the Court held that the PSA was ambiguous regarding which entities the Trustee could assert claims against, and accordingly the Trustee’s action against GE Mortgage was not barred by the agreement.  Decision.

Motion to Dismiss Granted in Part in J.P. Morgan and WMC RMBS Trust Suit

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On November 22, Justice Shirley Werner Kornreich of the Supreme Court of the State of New York partially dismissed a putback action brought by the trustee for the J.P. Morgan Mortgage Acquisition Trust 2006-WMC4 against J.P. Morgan Chase & Co. and WMC Mortgage.  The court held that damages are available only as to loans that breached representations and warranties.  The court rejected, however, JPMorgan’s argument that dismissal of certain breach claims was warranted by temporal limitations on the bank’s “bringdown” representations and warranties.  The court also denied the motion to dismiss the plaintiff’s indemnification claim at the pleading stage.  Decision.

RMBS Trustee Sues GE Subsidiaries for $356 Million

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On November 30, Deutsche Bank National Trust Company (Deutsche Bank), acting as trustee for the Securitized Asset Backed Receivables L.L.C. Trust 2006-WM3 (the “Trust”), filed a complaint against General Electric Capital Corporation (GE Capital) and WMC Mortgage L.L.C., (WMC), GE’s subprime lending subsidiary, in the United States District Court for the District of Connecticut.  The complaint alleges that WMC has breached its obligations to repurchase loans it originated that were in breach of representations and warranties WMC made when it sold the loans into the Trust.  The Trustee alleges that subsequent forensic testing of the underlying collateral shows that the loans were not originated in compliance with stated underwriting guidelines.  Due to the alleged poor quality of the loans, the Trustee alleges that WMC must have known that the loans were in breach of the representations and warranties at the time the loans were sold to the Trust.  The Trustee asserts four causes of action for breach of contract – (1) breach of the representations and warranties about the mortgage loans; (2) breach of WMC’s obligation to repurchase breaching loans; (3) breach of WMC’s obligations to notify the Trustee when a loan breaches a representation and warranty; and (4) breach of WMC’s obligations to indemnify the Trustee for expenses incurred resulting from a representation and warranty breach.  Complaint.

Deutsche Bank Sues GE Subsidiary Over $650 million in RMBS Losses

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On June 25, 2012, Deutsche Bank National Trust Company, trustee for the Morgan Stanley ABS Capital I Inc. Trust 2006 WMC-2, filed suit against WMC Mortgage, LLC and GE Capital in the District of Connecticut. The trustee asserts claims based on alleged breaches of contractual representations and warranties in the operative Pooling and Service Agreement regarding the quality of the mortgage loans held in the Trust and the underwriting practices used in connection with the issuance of those loans. The trustee alleges injuries of $650 million. Complaint.