Judge denies dismissal of ResCap mortgage lawsuit

UBS Real Estate Securities, SunTrust Mortgage included in suit

A New York bankruptcy judge on Tuesday did not dismiss four lawsuits brought by the Residential Capital bankruptcy trust, alleging mortgage originators including UBS Real Estate Securities and SunTrust Mortgage sold billions of dollars in defective loans. Per Law360:

The mortgage lenders were accused of selling residential mortgage loans with faulty underwriting that ResCap then packaged and resold, the article said.

“Substitution of the trust as the real party in interest to pursue these adversary proceedings is appropriate,” Judge Glenn wrote in the published opinion. “First, even if RFC lacked standing to file the original complaints against SunTrust and UBS, such defective standing would constitute an honest mistake, since there is no indication that RFC or the plaintiff acted in bad faith.”

The article noted that the judge did dismiss breach of contract claims for loans purchased by RFC before May 2006, ruling they were untimely.

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