Goliath Versus Goliath in High-Stakes MBS Litigation
Bradley T. Borden and David J. Reiss, Goliath Versus Goliath in High-Stakes MBS Litigation, Westlaw Journal Securities Litigation & Regulation (September 4, 2013)
5 Pages Posted: 10 Sep 2013
Date Written: September 9, 2013
The loan-origination and mortgage-securitization practices between 2000 and 2007 created the housing and mortgage-backed securities bubble that precipitated the 2008 economic crisis and ensuing recession. The mess that the loan-origination and mortgage-securitization practices caused is now playing out in courts around the world. MBS investors are suing banks, MBS sponsors and underwriters for misrepresenting the quality of loans purportedly held in MBS pools and failing to properly transfer loan documents and mortgages to the pools, as required by the MBS pooling and servicing agreements. State and federal prosecutors have also filed claims against banks, underwriters and sponsors for the roles they played in creating defective MBS and for misrepresenting the quality of the assets purportedly held in MBS pools. This commentary focuses on the state of this upstream litigation. It reviews claims of several complaints and discusses some decisions on motions for summary judgment in several of the cases. The commentary is not a comprehensive review of all the activity in this area, but it does provide an overview of the issues at stake in this litigation. The litigation in this area is still relatively new, but with hundreds of billions of dollars at stake, it will likely last for years to come and should reshape the MBS landscape.
Keywords: mortgage, MBSA, Mortgage-backed securities, securities litigation, monoline insurers, securitization, origination, rating agencies, sponsors, misrepresentation
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