Plaintiffs in lawsuits involving mortgage-backed securities tied to Residential Capital LLC are sometimes finding themselves fighting their battles in bankruptcy court.
In its role as RMBS master servicer, Wells Fargo Bank, N.A., filed a joinder in the chapter 11 bankruptcy case of Residential Capital LLC on Oct. 29. ResCap originally filed bankruptcy on May 14.
In its role as trustee, Wells Fargo joined Deutsche Bank National Trust Co.; Deutsche Bank Trust Company Americas; The Bank of New York Mellon Trust Company, N.A.; and U.S. Bank, N.A., in filing a supplement to trustees’ pre-auction objection.
Financial Guaranty Insurance Co. made a filing on Oct. 5 in ResCap’s bankruptcy to ensure $193,735,218 in premiums and other money it claims to be owed are repaid in the likely sale of its assets, Dow Jones reported. ResCap’s official committee of unsecured creditors asked the bankruptcy judge on Sept. 25 to compel Gibbs & Brun LLP to produce communications related to a proposed $8.7 billion settlement with 392 securitization trusts over RMBS, according to Law360.
The judge granted a class certification on Oct. 15 for lead plaintiffs, New Jersey Carpenters Health Fund, in two cases, 08 Civ. 5093 (the “Harborview” case) and 08 Civ. 8781 (the “RALI” case). Defendants in the cases include ResCap and the Royal Bank of Scotland Group PLC.
U.S. Magistrate Judge James C. Francis IV denied Union Central Life Insurance Company’s motion to commence limited discovery on Aug. 17 in an April 2011 lawsuit filed in Manhattan against Ally Financial Inc. and various parties. Discovery had been stayed pursuant to the Private Securities Litigation Reform Act of 1995.
A court filing by the Securities and Exchange Commission indicates that it issued a formal order of investigation of ResCap on Feb. 22 to probe possible fraud in the offer and sale of MBS, a story from Reuters indicated. The SEC, which is looking for possible misconduct in ResCap’s loan origination and underwriting practices, made the disclosure in a court request to force R.R. Donnelley & Sons to turn over certain due diligence records.
Dow Jones Newswires reported in July that a judge said ResCap could continue making settlements with bankrupt borrowers or borrowers whose homes are in foreclosure proceedings as it attempts to reorganize in bankruptcy. In addition, ResCap reported progress in a proposed $8.7 billion settlement with mortgage securities investors– with 337 of 392 trusts having already directed their trustees to accept the agreements.
