91 A.D.3d 546
N.Y. App. Div.2012Background
- This is a foreclosure action on a consolidated mortgage against WAMU assets acquired by JPMC via the P&A Agreement after WAMU's 2008 failure.
- Defendant contends JPMC does not own the note or have the right to foreclose because of the P&A terms and post-transaction allocations.
- The P&A Agreement is said to transfer WAMU loans to JPMC but exclude certain liabilities related to WAMU’s lending practices.
- Section 2.5 limits JPMC's assumption to servicing liabilities, not default-related liabilities of WAMU; section 3.5 concerns assets and recoveries to the FDIC as Receiver rather than to JPMC.
- The court leans on the interpretation that JPMC acquired WAMU’s loans and loan commitments and is entitled to foreclose on defaulted borrowers, while noting exemptions for liability defenses are narrow.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does JPMC have the right to foreclose as purchaser under the P&A Agreement? | JPMC purchased WAMU loans and loan commitments under the P&A Agreement. | The P&A Agreement exemptions limit foreclosure rights when defenses arise from WAMU’s lending practices. | JPMC has the right to foreclose as purchaser; defenses are not availing. |
| Do sections 2.5 and 3.5 of the P&A Agreement shield JPMC from borrower-default claims against WAMU? | None specified beyond the broad right to foreclose under the agreement. | Sections 2.5 and 3.5 limit liabilities and losses that would benefit WAMU/FDIC, not JPMC. | Sections 2.5 excludes WAMU-related default liabilities; 3.5 preserves FDIC rights and excludes loss on defaulted loans from JPMC. |
| Are defendant's origination-based defenses viable to defeat foreclosure? | JPMC’s ownership and the P&A terms support foreclosure irrespective of origination defenses. | WAMU's loan origination conduct could negate or limit liability. | The court declines to address these defenses as unavailing; they are not persuasive. |
| Can defendant obtain attorney’s fees or related fee recovery against JPMC? | None specific beyond standard fee provisions in the consolidating agreement. | Fees should not be awarded due to purported response deficiencies in foreclosing papers. | Defendant is not entitled to fees; JPMC may recover fees per the Consolidation, Extension and Modification Agreement. |
Key Cases Cited
- Yeomalakis v. Federal Deposit Insurance Corp., 562 F.3d 56 (1st Cir. 2009) (supports limits on liabilities assumed by successor banks in P&A contexts)