Barclays Bank and a defunct subprime lending unit of the company are off the hook for allegedly misrepresenting the quality of the mortgages that made up a $619 million mortgage bond after the Supreme Court of the state of New York ruled that U.S. Bank and the Federal Housing Finance Agency waited too long to file a lawsuit against Barclays.

Law360 first reported the news of the dismissal.

According to court documents, Judge Marcy Friedman ruled recently that U.S. Bank, acting as the trustee for Structured Asset Securities Corporation Mortgage Loan Trust, and the FHFA, acting as the conservator for Freddie Mac, filed suit against Barclays and the now-shuttered EquiFirst beyond the statute of limitations, and is therefore dismissing the lawsuit.

The lawsuit stems from a 2007 mortgage bond backed by loans originated by EquiFirst, which Barclays acquired in 2007. According HousingWire’s reporting at the time, EquiFirst was, at the time, the country’s 12th largest non-prime wholesale mortgage originator.

[Access all of HousingWire's 100+ related articles on FHFA lawsuits against subprime lenders by clicking here.]

Court documents show that the mortgage bond in question, Structured Asset Securities Corporation Mortgage Loan Trust: Series 2007-BC2, closed on Feb. 28, 2007.

On the six-year anniversary of the mortgage bond closing, the FHFA filed suit against Barclays and EquiFirst, stating Freddie Mac purchased certificates issued by the trust on the bond’s closing date.

In its suit, the FHFA claimed that EquiFirst violated the representations and warranties on the underlying mortgages.

The FHFA claimed that Barclays and EquiFirst were “contractually obligated” to cure or repurchase the loans where a breach of the reps and warrants policy had been discovered, but claimed that Barclays and EquiFirst failed to cure or repurchase any of the loans in question.

U.S. Bank filed a similar suit some eight months later, on Oct. 28, 2013, claiming similar breaches.

“As has now become clear, however, instead of selling a pool of loans that satisfied its representations and warranties, EquiFirst violated its contractual obligation by selling for securitization in the Trust many loans that breached its representations and warranties,” U.S. Bank claimed in 2013.

According to U.S. Bank’s filing, loan-level reviews conducted at its own expense revealed EquiFirst’s “extensive” breaches.

“A ‘re-underwriting’ of 143 mortgage loans revealed that 92% of the loans sampled breached EquiFirst’s representations and warranties,” U.S. Bank’s filing stated.

“Moreover, loan-level examinations of additional data revealed that, in addition to the 132 mortgage loans found to be in breach by the re-underwriting, at least 515 mortgage loans breached EquiFirst’s representations and warranties,” U.S. Bank continued. “Based on the information derived from the loan-level review, it reasonably can be inferred that breaches of EquiFirst’s representations and warranties exist throughout the mortgage loan pool it sold for placement into the trust.”

According to U.S. Bank, a later forensic review of the loans found that at least 298 of the 1,023 loans examined—more than 29%—breached one or more of EquiFirst’s representations and warranties.

Additionally, U.S. Bank claimed that dozens of loans originated by EquiFirst had understated loan-to-value ratios and “scores more” had improperly described occupancy characteristics.

Despite all those claims, the court ruled that the FHFA lacked standing to bring a lawsuit in the first place. The court also ruled that U.S. Bank’s lawsuit was filed after the statute of limitations passed, and did not relate it back to the FHFA’s summons with notice.

“Defendants contend that EquiFirst’s representations and warranties were made, at the latest, on February, 1, 2007. The court need not determine whether the representations and warranties were made on February 1 or February, 28, 2007,” Judge Friedman wrote in the dismissal.

“Even assuming that the breach of contract cause of action accrued on February 28, given FHFA’s lack of standing, its filing of the summons with notice on February, 28, 2014 was ineffective to commence the action within the statute of limitations,” Friedman continued.

Click here to read the court’s full decision.