Deutsche Bank Too Late|on Bad Mortgage Claim

     (CN) – Deutsche Bank’s claims that Quicken Loans misrepresented the quality of mortgage loans in 2006 are untimely, the Second Circuit ruled.
     Goldman Sachs Mortgage Company bought a number of mortgage loans from Quicken Loans in 2006, which were securitized in a Deutsche Bank trust.
     The agreement included a series of representations and warranties (R&Ws) about the quality of the mortgage loans, and a provision that Quicken had to repurchase the loan at a prescribed price if a breach of the R&Ws was discovered.
     In 2013, Deustche Bank sued Quicken claiming that an independent audit found breaches of the R&Ws with respect to borrower income, debt-to-income ratios, and owner occupancy. It said it demanded Quicken cure or repurchase the loans but the defendant failed to do so.
     In court, Quicken said the breach of contract was time-barred, and a federal judge agreed.
     The Second Circuit affirmed the ruling Monday.
     “We agree with the District Court that the statute of limitations began to run on the date the R&Ws became effective and were either true or false at that time,” U.S. Circuit Judge Richard Wesley said, writing for the three-judge panel.
     The extender provision of the Housing and Economic Recovery Act does not apply, because this case cannot be reasonably said to have been brought by the Federal Housing Finance Agency, the panel found.
     “FHFA’s only involvement was filing a summons with notice in state court – arguably while contractually barred from doing so by a no-action clause. After removal of the action, the Trustee filed the federal complaint and prosecuted the action based on diversity jurisdiction with no apparent participation from FHFA,” Wesley said.

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