Credit Chronometer

MORTGAGE LOANS AND MBS

Pre-financial crisis subprime RMBS litigation may be entering a new phase, moving on from fraud and repurchase actions brought by investors against sponsors and sellers to new actions by deal participants to recoup litigation losses from one another. The Credit Chronometer identifies litigation trends and the merits of potential claims.

After a long dormancy, subprime RMBS has made a comeback. The Credit Chronometer is on the lookout for history repeating itself and identifies best practices to avoid issues of the past.

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ABOUT THE AUTHOR

Joseph Cioffi is a partner at Davis & Gilbert in New York City where he is Chair of the Insolvency, Creditors’ Rights & Financial Products Practice Group, a multidisciplinary practice spanning corporate, insolvency and litigation. He has a unique perspective afforded by his experience in all stages of credit and market cycles, including in subprime lending investments, operations and litigation. Joseph and his group have been deeply involved in disputes and litigation resulting from the last financial crisis. He has written for or has been quoted by numerous publications, including American Banker, Law360, Asset Securitization Reporter, The Banking Law Journal, The Journal of Bankruptcy Law and Auto Finance News, regarding auto loans, student loans, marketplace lending, subprime residential mortgage-backed securities (RMBS) and PACE (Property Assessed Clean Energy) financing.

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ABOUT THE INSOLVENCY, CREDITORS’ RIGHTS & FINANCIAL PRODUCTS GROUP

Davis & Gilbert’s Insolvency, Creditors’ Rights & Financial Products Practice Group represents clients in a broad range of corporate, insolvency and litigation matters. The group has been actively involved in many of the most notable and highly visible business events in recent years related to the last economic downturn and has vast experience in the area of subprime lending, including the operation of origination platforms, relationships with servicers and defending large-scale asset-backed securities litigation. The broad and diverse experience of their attorneys makes them particularly well-equipped to advise clients in rapidly evolving markets, such as, those for auto loans, student loans, marketplace lending, mortgage loans and PACE (Property Assessed Clean Energy) financing. Additional highlights of the practice include the following:

Litigation: The group regularly prosecutes and defends litigation involving complex financial transactions and instruments and has defended residential mortgage-backed (RMBS) securitization litigation, including fraud and repurchase claims, involving nearly $2 billion in claims.

Bankruptcy: The group guides clients through financially distressed situations and helps formulate and execute creditor enforcement strategies, in particular, in the case of intermediaries facing obligations to third parties. The group has defended nearly $1 billion in fraudulent transfer claims brought by the trustee for the liquidation of Bernard L. Madoff Investment Securities LLC.

Corporate: The group also advises on a full range of financing transactions, including secured revolving and term credit facilities, receivable financing arrangements, intercreditor agreements, warehouse lending facilities and loan purchase agreements.

For more information about the Insolvency, Creditors’ Rights & Financial Products Practice Group, click here.

Mortgage Loans and MBS Pace Financing

Tiny Spaces, but Lots of Room for Pace-Type Financing

Nov 20, 2018 | By JOSEPH CIOFFI

Move over mortgages – there’s a new kind of real estate that could benefit from a new type of funding. As higher interest rates and rising prices are making affordable housing a challenge in many markets, cities can fight the problem with a small-scale solution – accessory dwelling units (ADUs). What’s an ADU? ADUs are additions (attached or detached) to homes or converted spaces within already existing buildings that can be used as rental units. Local governments on the west coast have become ...

Mortgage Loans and MBS

Once Bitten, but Not Shy: Subprime Mortgage Lending Is Alluring Again

Oct 31, 2018 | By JOSEPH CIOFFI

Bright, shiny objects are hard to resist. Like the glowing orb cast by the anglerfish – the last thing its prey sees before the deadly bite – subprime lending is back with the potential for profits shining like a beacon. There are several ways for lenders and investors to grab a piece of the action, but are the latest moves tempting a fate similar to 2007? There’s smoke . . . Although the housing market has been a relative sea of calm in recent years, the mortgage market has slowed down. ...

Mortgage Loans and MBS

Residential Mortgages and RMBS: 60-Second Market Review and Insights

Jul 12, 2018 | By JOSEPH CIOFFI

Originations and Issuances, by the Numbers New mortgage originations reached $428 billion in Q1 2018, down from $491 billion in Q1 2017 (a 12.9% decrease), according to data from the Federal Reserve Bank of New York. However, housing debt climbed to $8.94 trillion in Q1 2018, up from $8.63 trillion versus a year ago (an increase of 3.6%). Housing debt remains the leading source of consumer debt in the United States at 68% of the $13.21 trillion in national household debt. As such, it can be a ...

Mortgage Loans and MBS

Subprime Residential Mortgages and RMBS in 2018: A Tale of Two Cycles

Jan 29, 2018 | By JOSEPH CIOFFI

Ten Years Gone, but the Memory Remains Litigation related to pre-financial crisis subprime mortgage lending and securitization has resulted in a decade-long hangover for many of those who participated in the boom times. The boom actually lasted only four or five years for most participants, but more than a decade later, many are just now drawing closer to resolution of legacy disputes. The lingering headache for lenders, sponsors, trustees and investors explains the caution that has been the ...

Mortgage Loans and MBS

Residential Mortgages and RMBS: 60-Second Market Review and Insights

Sep 25, 2017 | By JOSEPH CIOFFI

Originations and Issuances, by the Numbers New mortgage originations reached $421 billion in Q2 2017, down from $427 billion in Q2 2016 (a 1.41% decrease). Housing debt reached $9.14 trillion in Q2 2017, up from $8.84 trillion in Q2 2016 (a 3.82% increase). Housing debt, at 68% of the $12.8 trillion in national household debt, continues to be far and away the leading form of consumer debt in the United States. Even so, quarterly originations are less than half than they were at their peak of ...

Mortgage Loans and MBS

Oh, the Indemnity! Claims for Reimbursement May Follow RMBS Litigation Settlements

Jun 16, 2017 | By JOSEPH CIOFFI AND SEIJI NEWMAN

When the Roman philosopher, Seneca, said, “Every new beginning comes from other beginning’s end,” he probably didn’t have litigation cycles in mind, but the quote is apropos of recent actions by defendants in RMBS litigation on the heels, or in anticipation, of their concluding litigation. The statute of limitations may have expired on new claims for repurchase or fraud based on alleged loan defects in pre-financial crisis subprime RMBS deals, but a settlement or litigation award paid out by a ...

Mortgage Loans and MBS

Banking Exchange, “Tick, Tick, Tick for DOJ. With Time Running Out, Feds Ramp Up Mortgage Litigation”

Jan 07, 2017 | By JOSEPH CIOFFI

This Banking Exchange article, prompted by the DOJ’s recent lawsuit against Barclays, discusses the longer statute of limitations available to the government, relative to private plaintiffs, to sue participants in the subprime mortgage securitization process. As Joseph states, for the immediate future “the 10-year statute of limitations remains an arrow in the government’s quiver.” Click here to view the full article.