U.S. Bank, Nat'l Ass'n v. UBS Real Estate Sec. Inc.
| Decision Date | 06 September 2016 |
| Docket Number | 12-cv-7322 (PKC) (JCF) |
| Citation | 205 F.Supp.3d 386 |
| Parties | U.S. BANK, NATIONAL ASSOCIATION, solely in its capacity as Trustee of Mastr Adjustable Rate Mortgages Trust 2006-OA2, Mastr Adjustable Rate Mortgages Trust 2007-1, and Mastr Adjustable Rate Mortgages Trust 2006-3, Plaintiffs, v. UBS REAL ESTATE SECURITIES INC., Defendant. |
| Court | U.S. District Court — Southern District of New York |
Sean P. Baldwin, David L. Elsberg, Andrew R. Dunlap, Steven M. Edwards, Nicholas F. Joseph, Paul P. Hughes, Mario A. Pecora, QUINN EMANUEL URQUHART & SULLIVAN LLP, Attorneys for Plaintiff
Scott D. Musoff, Robert A. Fumerton, Thomas J. Nolan, Charles F. Smith, Alexander C. Drylewski, Robert L. Dunn, Allison B. Holcombe, Abraham A. Tabaie, Lara A. Flath, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, Attorneys for Defendant
MEMORANDUM AND ORDER
A. It Is Unlikely that the Court Ever Had Bankruptcy Jurisdiction ...406
B. The Court Has Diversity Jurisdiction ...408 1. Legal Standard ...408
2. Diversity Jurisdiction Existed When the Action Commenced ...408
3. Judge Baer Concluded that the Action Was Brought by U.S. Bank on Behalf of the Trusts...409
4. U.S. Bank Is the Real Party to the Controversy ...409
5. The Recent Americold Decision Does Not Alter This Analysis ...410
6. The Amended Complaint Expressly Alleges Diversity Jurisdiction ...411 A. The PSAs' Unambiguous Terms Are Construed to Reflect the Intent of the Parties as Manifested in the Agreements ...412
B. Parol Evidence Plays No Role in Interpreting an Unambiguous Contract ...413
C. No Party Asserts that Contra Preferentem Applies ...413
D. Contractual Warranties under New York Law ...414
1. UBS Received Written Breach Notices of that Identified 4,869 Breached Loans, Including 4,462 Breaches that Were Timely Identified Before the Commencement of this Action ...417
2. Upon Receipt of the Holt Report of August 2015, UBS Had Knowledge of Purported Breaches in the Loans Identified Therein...420
5. Knowledge on the Part of UBS Cannot Be Premised on "Pervasive Breach" or "Constructive Knowledge...424
6. UBS's Knowledge of a Breach May Be Proved Circumstantially or Through Evidence of Willful Blindness...425
A. Overview of the MLS Warranty...427
B. The Timing of Representation and Warranty Listed in the MLS...427
C. The MLS Warranty is Absolute and Does Not Merely Guarantee Accurate Transcription...428
E. The Seven Items of MLS Data at Issue...430
7. DTI Ratio...439
A. Overview of the Guidelines Warranty and Its Relationship to the MLS Warranty...447
C. Exceptions to the Guidelines Must Be Documented...449
E. Permissible Use of Post-Origination Information by an Expert...455
F. Individual Guidelines Breaches...456 1. The Absence of "Core Documents" in Loan Files...456
2. Failure to Inquire As to the Stated Income That Does Not Appear Reasonable...457
4. The Relationship between the MLS Warranty and the Guidelines Warranty...459 1. The "Materially and Adversely Affects" Requirement of Section 2.03 Is Analyzed Separately from the Materiality Requirement Contained in Individual Representations and Warranties...467
2. A Material Adverse Effect under Section 2.03 May Be Proved with Evidence of an Increased Risk of Loss to the Certificateholders...467
3. The Trusts May Also Prove a Material Adverse Effect with Evidence that a Breach Resulted in Altered Loan Terms ...468
4. Multiple Breaches as Evidence of Material and Adverse Effect ...469
5. Proof of Intentional Misrepresentations by a Borrower Will Prove a Material and Adverse Effect...470
6. The Trusts' Proof of a Material and Adverse Effect...470
A. Loan 1456451...478
2. Income Misrepresentation with Red Flags...480
3. Material and Adverse Effect at the Time of Discovery or Notice...480
B. Loan 40577613...481
6. Material and Adverse Effect at the Time of Discovery or Notice...483
C. Loan 40599698...484
7. Material and Adverse Effect at the Time of Discovery or Notice...486
D. Loan 40588193...486 1. Income Misrepresentation and/or Lack of Reasonableness Inquiry...487
3. Verification of Employment...488
E. Loan 1447951...488
3. The LTV Ratio Defects...490
4. Material and Adverse Effect at the Time of Discovery or Notice...490
F. Loan 40595372...490
G. Loan 1416352...492
2. Income Misrepresentation and Reasonableness of Stated Income ...492
3. Improper Calculation of Debt...493
6. The LTV Ratio Defects...494
7. Material and Adverse Effect at the Time of Discovery or Notice...494
H. Loan 1450507...495
5. Material and Adverse Effect at the Time of Discovery or Notice...496
I. Loan 40595823...497
3. Missing or Inadequate Title Insurance...498
4. The LTV Ratio Defects...498
5. Material and Adverse Effect at the Time of Discovery or Notice...498
J. Loan 158522879...499
5. Material and Adverse Effect at the Time of Discovery or Notice...501
K. Loan 124359279...502
2. The Trust Has Not Proved a Material and Adverse Effect on the Interests of the Certificateholders at the Time of Notice or Discovery...502
L. Loan 1423423...502
3. Material and Adverse Effect at the Time of Discovery or Notice...504
M. Loan 138058233...504
3. Missing or Inadequate Title Insurance...506
N. Loan 1418398...506
2. Breach of the MLS Warranty Based on Misstated DTI Ratio...508
O. Loan 1477160...509
5. The LTV Ratio Defects...512
6. Material and Adverse Effect at the Time of Discovery or Notice...512
P. Loan 158514566...513
6. Material and Adverse Effect at the Time of Discovery or Notice...515
Q. Loan 1470345...516
4. Material and Adverse Effect at the Time of Discovery or Notice...518
R. Loan 158609489...518
2. Occupancy Misrepresentation and the Related "Property Violation" Defect... 519
3. Undisclosed Mortgage Debt with Red Flags...521
5. Material and Adverse Effect at the Time of Discovery or Notice...521
S. Loan 1416080...522
4. Material and Adverse Effect at the Time of Discovery or Notice...523
T. Loan...
OVERVIEW OF THE AGREEMENTS AND CLAIM ...400
SUBJECT MATTER JURISDICTION ...405
CHOICE OF LAW ...411
BURDEN OF PROOF ...411
RELEVANT NEW YORK CONTRACT PRINCIPLES ...412
THE TRUSTS MAY RECOVER THE MONEY DAMAGE EQUIVALENT OF THE REPURCHASE REMEDY FOR BREACHED LOANS WHERE REPURCHASE IS NOT POSSIBLE ...414
THE TRUSTS, THE TRUSTEE AND RELATED PERSONS ...415
THE NOTICE AND DISCOVERY REQUIREMENT ...416
A. The Requirements of Section 2.03 ...416
THE MORTGAGE LOAN SCHEDULE WARRANTY...427
THE MAXIMUM LTV WARRANTY...460
THE MORTGAGE FILE WARRANTY...460
THE TITLE INSURANCE WARRANTY ...461
THE HAZARD INSURANCE WARRANTY...463
THE "MATERIALLY AND ADVERSELY AFFECTS" REQUIREMENT...464
A. "Materially and Adversely Affects" Is Measured from the Date of the Repurchase Demand, Not from the Date that the Warranties Were Made...464
THE "MISSING" INDYMAC FILES...475
To continue reading
Request your trial
33 cases
-
Nuance Commc'ns, Inc. v. Int'l Bus. Machs. Corp.
...and evidence of willful blindness can be considered in determining actual knowledge.20 See U.S. Bank, Nat'l Ass'n v. UBS Real Est. Sec. Inc., 205 F. Supp. 3d 386, 425 (S.D.N.Y. 2016) (quoting Woloszynowski v. N.Y. Cent. R.R. Co., 254 N.Y. 206, 172 N.E. 471, 472-73 (1930) ) (citing Reed v. F......
-
ResCap Liquidating Trust v. Primary Residential Mortg., Inc. (In re ResCap Liquidating Trust Litig.)
...to have considered this exact issue, this Court agrees with [plaintiff's] interpretation."); U.S. Bank, Nat'l Ass'n v. UBS Real Estate Sec. Inc. , 205 F. Supp. 3d 386, 429 (S.D.N.Y. 2016) ("MLS Warranty imposes a form of strict or absolute liability for a materially untrue or incorrect stat......
-
Deutsche Bank Nat'l Trust Co. v. Morgan Stanley Mortg. Capital Holdings LLC, 14–cv–3020 (KBF)
...respect to loans that have already been liquidated or foreclosed. See ACE, 5 F.Supp.3d at 554 ; U.S. Bank, Nat'l Ass'n v. UBS Real Estate Sec. Inc., 205 F.Supp.3d 386, 414–415 (S.D.N.Y. 2016) ; Deutsche Alt–A Sec. Mortg. Loan Tr., Series 2006–OA1 v. DB Structured Prod., Inc., 958 F.Supp.2d ......
-
Ambac Assurance Corp. v. Countrywide Home Loans, Inc.
...to its initial complaint and are just as effective as its pre-suit demands. See U.S. Bank Natl. Assn. v. UBS Real Estate Secs., Inc., 205 F.Supp.3d 386, 421 (S.D. N.Y. 2016) ("Nomura concluded that the existence of timely, pre-suit breach notices was sufficient for the trustees to purse lat......
Request a trial to view additional results