On Dec. 19, a five-judge appellate panel dismissed the $330 million lawsuit brought by trustee, HSBC Bank, against Deutsche Bank for breach of reps & warranties and failure to repurchase 8,000 loans in the covered securities because the claim was filed to late.
The court determined that the six-year statute of limitations for mortgage repurchase claims should start on the deals closing date and not when the MBS seller refuses to repurchase loans that breach its contractual assurances, according to a Tuesday Deutsche Bank report.
Deutsche Bank said in the report that ruling sheds light on when the clock begins on statute of limitations for putback claims and “should have a big impact on pending claims and significantly curtail new claims.” The appeals court ruled that the bondholders in the case against Deutsche Bank were “not authorized by the pooling service agreement to provide notices of default’ in connection with the sponsor’s breach of the reps & warranties despite the fact that they filed the suit on the last day within the six-year statute of limitation period,” explained the Deutsche Bank report.
Nor does the bondholders filing represent a “substitution of the trustee’s complaint, which was filed almost six months after the expiration of the limitation period."
According to the report, bondholders filed the suit against the sponsor on March 28, 2012, the last day of the limitations period and before a 60-day period to cure the loans and a 90-day period to repurchase them expired, according to the report. The trustee filed the repurchase claim on behalf of the bondholders on September 13, 2012.