Lehman XS Trust, Series 2006-4N v. Greenpoint Mortgage Funding, Inc.
991 F. Supp. 2d 472
S.D.N.Y.2014Background
- Lehman Brothers Bank, FSB purchased GreenPoint-originated loans in 2006 under a Flow Mortgage Loan Purchase and Warranties Agreement (Dec 12, 2001).
- The loans were deposited into the Lehman XS Trust, Series 2006-4N, securitized as Certificates, and sold to investors; the Trust holds rights to enforce GreenPoint’s obligations under the Purchase Agreement.
- GreenPoint guaranteed Seller Representations about loan information and underwriting; it also guaranteed Loan Representations concerning loan quality and compliance with guidelines.
- Section 8 imposes cure or repurchase obligations for breaches, and Section 8(c) (Accrual Provision) states accrual occurs upon discovery or notice, failure to cure or repurchase, and demand.
- Trust reviewed loans in 2012, identified breaches, issued Breach Notices in December 2012 and January 2013 demanding cure or repurchase; GreenPoint delayed responding, stating insufficient information to assess breaches.
- Trust filed this diversity action in July 2013; GreenPoint moved to dismiss as time-barred.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When did the breach accrue under the Accrual Provision? | Trust contends accrual began in 2013 upon rejection to cure. | GreenPoint argues accrual began in 2006 when loans were deposited, making claims timely barred. | Accrual occurred in 2006; the provision does not reset accrual or create a new breach. |
| Does ACE Securities control accrual date for these breaches? | ACE supports accrual at discovery/demand after cure window; allows later suit. | ACE cannot extend limitations indefinitely by delay of demand. | ACE governs; breach accrues at closing in 2006, not upon later remedy demands. |
| Does the Accrual Provision define a new breach or extend the statute indefinitely? | Accrual provision delays accrual until cure or repurchase, delaying suit. | Accrual provision is a pre-suit remedy, not a separate breach or an indefinite extension. | Accrual provision is not a separate breach and does not indefinitely extend limitations. |
Key Cases Cited
- ACE Sec. Corp. v. DB Structured Prods., Inc., 112 A.D.3d 522 (1st Dep’t 2013) (accrual occurs at contract closing; pre-suit cure/demand cannot extend statute)
- Continental Cas. Co. v. Stronghold Ins. Co., Ltd., 77 F.3d 16 (2d Cir. 1996) (pre-suit remediary provisions; not separate breach promises)
- John J. Kassner & Co. v. City of New York, 46 N.Y.2d 544 (1979) (cannot contractually waive/extend statute indefinitely)