If you don’t know how to read between the lines, you miss everything

So in a minor release, you have the following, trumpeting the legal prowess of the Orrick firm, representing Credit Suisse and its subsidiary DLJ. A lawsuit was filed purportedly on behalf of U.S. Bank seeking to enforce repurchase obligations that DLJ had issued and which Credit Suisse would be required to honor if they were valid.

This is all part of the illusion that creates the erroneous impression that anyone cares about what happens to residential transactions with homeowners. The suit naming U.S. Bank as Plaintiff was more than likely a “friendly suit,” in which the parties are actually trying to create case precedent.

U.S. Bank, as trustee wants to remove the pressure to enforce the “repurchase agreements.” Those are essentially guarantees of purported loan transactions that were underwritten not for the purpose of repayment, but rather for the purpose of selling certificates. U.S. Bank has only one objective — to keep those scheduled fee payments coming in from the investment banks on condition that it do nothing at all.

The sole reason for the repurchase agreement was to lend credence to a false statement: that the transactions with homeowners were loans and were underwritten as such. This “guarantee” was meant to mislead investors into thinking that “lenders” (or as I call them “pretender lenders”) had an actual stake in the outcome of the transactions with homeowners.

In truth, those repurchase obligations, guarantees or whatever else you want to call them, were a mere smokescreen. They were issued by legally existing business entities with insufficient capital to ever honor them in most instances.

But then you have cases like this one involving the always hidden Credit Suisse. They DO have the capital to honor the guarantees issued by the old Donaldson., Lufkin and Jenrette Securities firm (as the seller of falsely labeled loans in which, but for the repurchase agreement, they had no stake in the outcome of transactions with homeowners).

What to do? Nobody ever expected the repurchase agreements to be real. But investors were demanding that U.S. Bank, as trustee, act as a trustee. This put pressure on U.S. Bank, endangering its prodigious scheduled fee payments for doing nothing except allowing its name to be used as part of legal or fictitious entities.

And Credit Suisse had no intention of accepting a credit risk on a transaction in which the entire business plan was to perform the transaction with no risk.

So you end up with a lawsuit of U.S. Bank vs. DLJ, a subsidiary of Credit Suisse and, aw-shucks, it was decided against U.S. Bank who didn’t want to win anyway — if in fact they ever had anything to do with the lawsuit. But at least they could say they tried. Other lawsuits brought by investors against U.S. Bank failed because U.S. Bank was found to have no fiduciary duty to enforce the repurchase agreements.

So now this case seals the fate of investors who thought they were purchasing certificates with fundamental value. They were not. And the almost laughable turning point of this “case” is that it was found that the contractual provisions requiring timely identification of the loans in “default” had been breached by U.S. Bank.

They left out the contractual provisions that prohibited U.S. Bank from even inquiring into the status of the portfolio or any transaction supposedly owned within the portfolio. And they left out the fact that NONE of them maintained a loan account receivable because everyone had been paid off in accordance with contracts.

So here is how the Orrick firm announced it, signaling the end to even the most remote liability for underwriting “loans” that would “fail” — i.e., in which the transaction was declared by a servicer with no knowledge to be in “default.”

Siding with the arguments of an Orrick litigation team, the New York Court of Appeals today issued a precedent-setting decision for our client, Credit Suisse subsidiary DLJ Mortgage Capital, that has broad implications for other high stakes RMBS repurchase cases pending in the lower courts.

In a 6-1 decision, New York’s highest court rejected U.S. Bank’s efforts to recover damages for hundreds of purportedly defective loans it had failed to identify to DLJ in timely pre-lawsuit notices, holding loan-specific pre-suit notice was required under a contractual sole remedy provision. The Court described U.S. Bank’s arguments as “nothing more than an attempt to avoid the consequences of the sole remedy provision.”

Our team urged the appeals court to address this key issue to ensure sophisticated commercial parties remain confident agreed-upon contractual terms will be enforced by the courts. This ruling directly impacts many other pending RMBS repurchase cases because the provision it construed is standard across RMBS contracts. The win for DLJ also prevents U.S. Bank from recovering “accrued interest” that had not actually accrued on liquidated loans, further limiting DLJ’s potential exposure in the case.


Nobody paid me to write this. I am self-funded, supported only by donations. My mission is to stop foreclosures and other collection efforts against homeowners and consumers without proof of loss. If you want to support this effort please click on this link and donate as much as you feel you can afford.

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Neil F Garfield, MBA, JD, 75, is a Florida licensed trial and appellate attorney since 1977. He has received multiple academic and achievement awards in business, accounting and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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But challenging the “servicers” and other claimants before they seek enforcement can delay action by them for as much as 12 years or more. In addition, although currently rare, it can also result in your homestead being free and clear of any mortgage lien that you contested. (No Guarantee).

Yes you DO need a lawyer.
If you wish to retain me as a legal consultant please write to me at neilfgarfield@hotmail.com.

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