DEUTSCHE BANK NATIONAL TRUST COMPANY vs WMC MORTGAGE L.L.C., GE | Breach of Contract - $666 MILLION to 3,399 borrowers (the “Mortgage Loans”) - then grouped or “pooled” the loans and sold them to the Trust
UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT
DEUTSCHE BANK NATIONAL TRUST COMPANY, solely as Trustee for the MORGAN STANLEY ABS CAPITAL I INC. TRUST, SERIES 2007-HE6, Plaintiff, v. WMC MORTGAGE L.L.C., as successorby- merger to WMC Mortgage Corp., and GENERAL ELECTRIC CAPITAL CORPORATION, Defendants.COMPLAINT
Plaintiff Deutsche Bank National Trust Company, solely in its capacity as Trustee (the “Trustee”) of the Morgan Stanley ABS Capital I Inc. Trust, Series 2007-HE6 (the “Trust”), brings this Complaint against WMC Mortgage L.L.C., as successor-by-merger to WMC Mortgage Corp. (“WMC”), and General Electric Capital Corporation (“GE Capital” and together with WMC, “Defendants”). The Trustee hereby alleges as follows:NATURE OF THE ACTION
1. This is a breach of contract action concerning a transaction known as a mortgage securitization. WMC, GE Capital’s wholly-owned subsidiary, “originated” or made loans totaling more than $666 million to 3,399 borrowers (the “Mortgage Loans”), then grouped or “pooled” the loans and sold them to the Trust. Investors in the Trust, known as “Certificateholders,” were supposed to receive income as the borrowers repaid the Mortgage Loans. 2. WMC, by the terms of the contract, assured the Trust and Certificateholders that the borrowers were in a position to repay the Mortgage Loans. It did so in four crucial ways: First, WMC made 67 separate representations and warranties that the borrowers were creditworthy and that the Mortgage Loans were properly originated and represented accurately; second, WMC promised to notify the Trustee when those representations and warranties were breached; third, WMC promised to repurchase Mortgage Loans in material breach of its representations and warranties to make the Trust whole; and, fourth, WMC promised to indemnify the Trustee for breaches. This four-part remedial framework allocates to WMC the risk that the Mortgage Loans may breach WMC’s representations and warranties. 3. It turns out that the bulk of the Mortgage Loans were bad because the borrowers were not creditworthy or because WMC did not conform to underwriting standards. WMC has breached its representations and warranties, has breached its duty to notify the Trustee of breaches, has refused to repurchase the bad loans, and has breached its duty to indemnify the Trustee. The Trust, and consequently Certificateholders, are entitled to damages in excess of $500 million. 4. Accordingly, the Trustee, on behalf of the Trust, brings this action to enforce the contract and receive the benefit of the bargain. [...]