U.S. Bank N.A. v GreenPoint Mtge. Funding, Inc.

U.S. Bank N.A. v GreenPoint Mtge. Funding, Inc.

Opinion

 [*81]  [**13] 

Gische J.

This is a "put-back" action, involving residential mortgage backed securities (RMBS). [****2]  Plaintiff U.S. Bank National Association, the trustee of the securitization trust, claims that a large number of the mortgages, originated by [***2]  defendant, GreenPoint Mortgage Funding, Inc., and held by the trust, breached the representations and warranties that GreenPoint made regarding their quality. Although under the governing agreements GreenPoint was obligated to cure any nonconforming mortgage within 60 days of either discovering or being notified of a breach, the trustee claims that GreenPoint failed to cure by either replacing or repurchasing the nonconforming mortgages.

The issues before us are related to the contractual requirement and sufficiency of notices of breach (breach notice). We consider whether a breach notice is required when the underlying contract claim is based upon a defendant's independent discovery or knowledge of the nonconforming mortgages. We also consider whether an otherwise late breach notice can relate back in time to the commencement of the underlying action in order to avoid dismissal. For the reasons that follow, we hold that the breach of contract claims based upon defendant's alleged independent discovery or likely knowledge of nonconforming mortgage loans do not require breach notices to be sent before an action may be brought. We further hold that the doctrine of relation back does [***3]  not save claims that do require that a breach notice be sent as a precondition to bringing an action.

GreenPoint originated 418 mortgage loans that were sold to a nonparty sponsor pursuant to a mortgage loan sale agreement (MLSA) dated August 1, 2005. The MLSA included various representations and warranties concerning the characteristics, quality and risk profile of the mortgage loans. Those and other loans were pooled together and conveyed to the J.P. Morgan Alternative Loan Trust (JPMALT) for securitization through the issuance of RMBS certificates. The securitization closed on May 31, 2007, and plaintiff is JPMALT's trustee. The representations and warranties in the MLSA were incorporated and reconstituted in a separate agreement, also dated May 31, 2007, made for the benefit of the trustee (and others).

Plaintiff contends that most of the loans owned by the trust, which originated with GreenPoint, breached the representations, [*82]  warranties and other covenants set forth in MLSA §§ 7.01 and 7.02. The representations include statements that none of the loans are in default, that the mortgaged property is lawfully occupied, and that no mortgage loan has been more than 30 days delinquent since origination [***4]  (MLSA § 7.01). MLSA § 7.02 (l) also states, in sum and substance, that the MLSA contains no untrue statements or omissions of material fact.

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