Judge Denies Dismissal of ResCap Mortgage Lawsuit
UBS Real Estate Securities, SunTrust Mortgage included in suit
A New York bankruptcy judge on Tuesday did not dismiss four lawsuits brought by the Residential Capital bankruptcy trust, alleging mortgage originators including UBS Real Estate Securities and SunTrust Mortgage sold billions of dollars in defective loans. Per Law360:
The mortgage lenders were accused of selling residential mortgage loans with faulty underwriting that ResCap then packaged and resold, the article said.
“Substitution of the trust as the real party in interest to pursue these adversary proceedings is appropriate,” Judge Glenn wrote in the published opinion. “First, even if RFC lacked standing to file the original complaints against SunTrust and UBS, such defective standing would constitute an honest mistake, since there is no indication that RFC or the plaintiff acted in bad faith.”
The article noted that the judge did dismiss breach of contract claims for loans purchased by RFC before May 2006, ruling they were untimely.
Glenn did throw the banks a bone when he barred ResCap’s breach of contract claims related to loans purchased before May 14, 2006. But even that portion of the decision didn’t go fully in the banks’ favor. While Glenn found that a six-year statute of limitations applied, the banks’ primary argument was that the applicable statute of limitations was three years. That would have created a May 14, 2009, starting date for ResCap’s contract claims, cutting off most of those claims because ResCap bought virtually all the mortgages at issue before that date, according to the decision.