Bilzin Sumberg’s Mortgage Repurchase Defense Experience
In late 2006, several of our mortgage loan originator clients began to notice an increase in the volume of “repurchase” demands being made by the entities to which they had sold loans in prior years – primarily the major banks and the Government-Sponsored Entities (GSEs), including Fannie Mae and Freddie Mac. Our clients were stunned by what they viewed as a sudden about-face by the loan purchasers. These clients had dutifully originated the loans by following criteria created and developed by the big banks and Wall Street. Those criteria often specifically called for loose, reduced documentation requirements and an absence of verification of certain borrower information. When this inevitably led to the foreclosure crisis in America, the big banks and GSEs acted as if the originators were somehow “guarantors” of the accuracy of all information provided by the borrowers – even in categories that the originators were not even permitted to verify.
The uptick in repurchase demands turned into an avalanche by late 2008 and 2009. Loan aggregators (the big banks and the GSEs) seemingly wanted the world to believe that every originator that had sold them loans in previous years had somehow “misled” them about the quality of those loans. Trustees and receivers acting on behalf of failed lending institutions took the same approach, blaming the originators, rather than recognizing that originators had been supplying the products the failed lenders had wanted. They simply followed the lenders’ own rules and requirements in originating those products.
Early on, as the Bilzin Sumberg Repurchase Team reviewed “repurchase” and “make-whole” demands received by our clients – demands related to such high risk products as stated income loans (a/k/a “liar loans”), and no income/no asset (NINA) loans – we recognized two fundamental truths:
1. The big banks were trying to revise history at the expense of loan originators; and
2. The wave of demands of this sort was only going to increase.
We also knew, as partners of one of the few major law firms that generally declined to represent the big banks (for business reasons), Bilzin Sumberg was uniquely positioned to help originators without incurring incapacitating conflicts. We also realized that the best team to handle the flood of impending “repurchase” demands would be a combination of transactional and litigation lawyers. We have more than 45 years of combined experience between Robert M. Siegel and Philip R. Stein, our two partners who lead the Bilzin Sumberg Repurchase Defense Team. Phil specializes in complex litigation and has successfully represented both plaintiffs and defendants in trials, appeals and arbitration proceedings throughout the country. Bob is a commercial finance lawyer and has represented both lenders and borrowers in numerous complex financial transactions, including several multi-billion dollar deals, both nationwide and abroad. Both Phil and Bob devote a substantial part of their practices to representing originators and sellers of mortgage loans throughout the country, as they defend against pre-litigation and post-litigation loan repurchase claims made by banks and other investors.
We handle major repurchase litigation matters literally coast to coast for originators, both large and small, in matters involving a handful of loans to lawsuits involving multimillion dollar claims. We have handled matters adverse to virtually all of the big aggregators and the failed institutions that are pursuing repurchase claims, including Bank of America, CitiMortgage, JPM Chase, Aurora Bank, Lehman Brothers, Ally, and SunTrust Mortgage. We do so with a focus not only on litigation success, but also on cost-efficiency for our clients. We pride ourselves on taking a business approach to resolving all “repurchase” matters, without litigation when it can reasonably be avoided. Because we understand the pertinent legal and business issues inside and out, we often are able to help our clients avoid litigation altogether, or resolve a filed lawsuit on favorable terms.
Over the years, we have developed what clients and opponents alike recognize is an unparalleled knowledge base related to repurchase issues, ranging from “loan level” issues to how securitization and failed bank agreements may affect an originator’s obligations when confronted with a repurchase demand. We know these issues as they relate to our clients’ particular adversaries and as a result, we have well established strategies to employ in defending against repurchase issues, whether in, or outside of, litigation.
Robert (Bob) M. Siegel
Bob Siegel heads Bilzin Sumberg’s Corporate Finance Practice and is Partner of its Corporate & Securities and Business Finance & Restructuring Groups. He is one of the most knowledgeable lawyers in Florida in the areas of secured transactions under the Uniform Commercial Code, Florida usury law, letters of credit, and personal property leasing transactions. Over the course of his career, Bob has represented both lenders and borrowers in numerous complex financial transactions, including several multi-billion dollar deals, both nationwide and abroad. He has developed a substantial client base across the United States as well as overseas, practicing law on a national level with other top lawyers, financial advisors and other professionals in high-profile matters.
For the past several years, Bob has devoted an extensive amount of time in the representation of numerous mortgage originators and sellers throughout the country. He has developed strategies to prevent or minimize potential losses resulting from mortgage investor repurchase and indemnification demands. He frequently provides substantive litigation support to the firm in matters involving these issues. He is a frequent speaker and author on this topic.
Philip (Phil) R. Stein
Phil Stein is a Partner in Bilzin Sumberg’s Litigation Group and focuses his practice on complex commercial litigation. Phil devotes a substantial part of his practice to representing originators and sellers of mortgage loans throughout the country, as they defend against loan repurchase claims made by banks and other investors. He is also particularly experienced in litigation involving: financial fraud and other business torts; commercial contracts; complex business disputes; corporate governance; trade secrets; executive compensation; and professional liability issues (including director and officer liability issues, and accounting malpractice claims). Phil has successfully represented both plaintiffs and defendants in trials, appeals and arbitration proceedings throughout the country.