This morning’s Star Tribune reports another aftershock of the subprime collapse, a lawsuit brought by U.S. Bank (or, more specifically, by U.S. Bank as a trustee for a securitized pool of loans on behalf of investors in that financial cesspool). The gist of the lawsuit is that the defendants, two defunct subprime lenders, basically threw money away in bogus loan transactions, and then sold the toxic waste to U.S. Bank hidden in the bowels of a prettied-up Trojan Horse.
The complaint is here. The plaintiff is represented by the New York law firm of Kasowitz Benson Torres & Friedman LLP and locally by the Maslon firm.
This is not the only mortgage repurchase case pending in the District of Minnesota though it is probably the biggest. It has been assigned to Sr. U.S. District Court Judge Paul A. Magnuson and Mag. Judge Tony L. Leung.
But aren’t these now long-defunct subprime lenders “judgment proof,” a.k.a., “broke”? According to the Star Tribune article,
WMC, based in Burbank, Calif., was acquired in 2004 by General Electric Co., which shut down the wholesale mortgage originator in 2007. General Electric declined to comment. Equifirst, based in Charlotte, N.C., is owned by Barclays bank in London. Equifirst shut down in 2009.
Minnesota Litigator is sure to follow this lawsuit but, from a defense perspective, it is not difficult to predict that GE and Barclays will take the position that they are not liable for WMC or Equifirst’s alleged wrong-doing from years before.