Deutsche Bank Nat'l Trust Co. v. WMC Mortg., LLC

Deutsche Bank Nat'l Trust Co. v. WMC Mortg., LLC

Opinion

RULING ON DEFENDANT'S MOTIONS FOR PARTIAL DISMISSAL OF COMPLAINT

HAIGHT, Senior District Judge:

This diversity action alleges breaches of contract. The contract in suit was generated by securitized residential mortgage loans. WMC Mortgage L.L.C. ("WMC"), the Defendant, is charged by the Plaintiff Trustee with having breached promises and representations contained in the contract. Defendant now moves to dismiss the complaint in part.

Three other cases, involving for the most part the same parties and forms of contract, were assigned to this Court as related cases. They are identified infra. WMC made comparable motions to dismiss in each of these cases. The Court heard consolidated oral arguments on all four cases. This Ruling is made in the captioned, first-filed case. It will resolve all four motions.

I. INTRODUCTION

WMC originated or acquired thousands upon thousands of residential mortgages, each collateralized by the residential property covered by the loan.

WMC did not play the role of the old-fashioned home lender, waiting for each borrower to make timely mortgage payments. Instead,  [*3] WMC "grouped" or "bundled" thousands of mortgages into a single "pool" (to use the industry's mixed metaphors). Each pool of mortgages passed through the hands of two other entities (a "sponsor" and a "depositor") and eventually came to rest in the hands of a Trust, which issued residential mortgage-backed securities ("RMBS") certificates and sold them to investors (hereinafter "the Certificateholders"). The certificates entitled the Certificateholders to shares of the mortgage payments made by borrowers on the underlying loans.

If everything went well, the borrowers faithfully performed the underlying mortgages, and every entity and individual in the mortgage-securitization chain made a great deal of money. As economist Paul Krugman recently wrote in The New York Times, each participant in such a multi-tiered investment structure takes a cut "as the money sloshes by." However, the well-publicized bursting of the housing bubble and resulting profusion of foreclosed or nonperforming home loans have caused substantial losses, principally to Certificateholders who purchased certificates from the Trusts which issued them. The four cases involved in this Ruling were filed by trustees on  [*4] behalf of certificateholders against WMC. The Trustees allege that WMC breached a number of obligations placed upon WMC by the contracts between the parties.

Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.