Statute of Limitations in Question for Mortgage Tied Breach Claims
Posted on Jan 01, 2016
A pending case in the New York Supreme Court will determine the fate of billions of dollars tied to mortgage-backed securities. The issue in question is how long mortgage-backed securities (“MBS”) trustees have to assert claims that MBS sponsors breached their contracts. Under New York law, the statute of limitations for breach of contract lawsuits is six years. The judges overseeing the case, however, disagree over when the statute over those claims begins to run.
The issue presented to the court is whether an MBS pooling and servicing agreement is breached when the underlying loans fall short of the promises that the sponsor made on the day that the deal was signed. In the alternative, the breach may have occurred when the sponsor failed to meet the obligation to repurchase deficient loans. Judge Peter Sherwood ruled that the clock starts to run on the securitization’s closing date. Judge Shirley Kornreich, however, held that a refusal to repurchase allegedly defective underlying loans triggered the statute.
MBS trustee breach of contract lawsuits are also known as put-back claims. The case is a matter of first impression in New York. There are at least 14 similar cases currently pending in New York courts that Judge Sherwood is presiding over that could be directly affected by this ruling on the statute of limitations. There are countless others in other courts throughout the state.
For more information about breach of contract and other business litigation matters, contact a New York breach of contract attorney today at (888) 497-3410.