Southern District of New York Rules Suit Against RMBS Trust Master Servicer May Proceed

In an action pending in the Southern District of New York, which could have significant implications for disputes regarding the reimbursement rights of master servicers in the multi-billion dollar RMBS trust market, the Cuddy & Feder litigation team, led by Andrew Schriever and Brendan Goodhouse, successfully opposed and defeated a motion to dismiss in an action seeking $6.8 million of damages against the master servicer of four related RMBS trusts. The court held that our client MBIA had adequately pled that the trusts’ master servicer, Nationstar Mortgage, had inappropriately withdrew several millions of dollars of trust funds at the ultimate expense of MBIA. Rejecting Nationstar’s contention that the disputed withdrawals were authorized by the contracts governing the trusts, the Court ruled that MBIA’s contract-based claim for $6.8 million could proceed.

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