Trustees Invoke Powers to Recoup Legal Expenses

According to a Bloomberg article, after New Residential Investment Corp. executed a clean-up call, Wells Fargo surprised many by invoking its trustee powers to withhold $90 million owed to investors for impending legal fees. As reported, "The 20 transactions had a principal balance of $540 million and are among more than 2,000 deals involved in a lawsuit brought by bondholders including BlackRock Inc. and Pacific Investment Management Co. in 2014 to recover losses from the financial crisis." The suit involves six banks that acted as trustees, with investors alleging that the RMBS deals on which those banks acted as trustees were misrepresented, and that the trustee banks failed to force the sellers to buy back defective loans.

SFIG works to identify, analyze, explain, and create solutions for the legal, operational, and risk-related issues among post-crisis RMBS industry participants in a manner that increases transparency and promotes a functioning PLS market. Under the framework of RMBS 3.0, SFIG continues to work to ensure that lessons learned from the crisis are implemented and adhered to in future deals. To learn more, or if you would like to participate in any of the RMBS 3.0 working groups, please contact William.Innes@SFIndustry.org.

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