Sharks Eating Sharks: a Case Study out of the SDNY from 2016

The legal case of US Bank (trust) v. UBS (United Bank of Switzerland) Real Estate was decided in 2016 in SDNY. The order following decision extends for literally more than 100 pages. The gist of the case is that US Bank went after UBS because of the poor loan quality of the loans making up the pool of investement mortgages in the PSA put together with UBS to memorialize the trust. Bill will explain and Charles will frame legal implications for how homeowners can use a lot of the findings and information from the lawsuit in their own cases defending or suing institutional lenders and servicers. While UBS could not meaningfully demonstrate that they deposited the actual mortgage notes per the PSA, into the US Bank trust, US Bank alleged to have never even received the Mortgage Files which make up the source of documentation for the individual loans. Yet US Bank could proffer no meaningful evidence that they US Bank, did not in fact receive the Mortgage Files at issue, so much of the Court Order rejected their claims. 

The overall Court Order is an exemplar in contrived complexity, yet also an exemplar of sound and unfortunately vanishing clear and compelling language when relating complex topics such as this one. The Order noted on page 7, "Remarkably, the overwhelming majority of loans in the Trusts were for the purpose of refinancing a home already owned by the borrower, rather than for the purpose of purchasing new property...Undoubtedly, many of these were for the purpose of monetizing and extracting rising equity for other use." Hence, of course, the poor loan quality, and the high default rates in these trusts, here leading US Bank to sue through the trust at issue, to try and stanch the bleeding to them, from the bad loans. 

Charles will then discuss how this contrived complexity is one of the reasons homeowers are reluctant to defend themselves, and address other reasons for that reality.