On November 30, Deutsche Bank National Trust Company (Deutsche Bank), acting as trustee for the Securitized Asset Backed Receivables L.L.C. Trust 2006-WM3 (the “Trust”), filed a complaint against General Electric Capital Corporation (GE Capital) and WMC Mortgage L.L.C., (WMC), GE’s subprime lending subsidiary, in the United States District Court for the District of Connecticut. The complaint alleges that WMC has breached its obligations to repurchase loans it originated that were in breach of representations and warranties WMC made when it sold the loans into the Trust. The Trustee alleges that subsequent forensic testing of the underlying collateral shows that the loans were not originated in compliance with stated underwriting guidelines. Due to the alleged poor quality of the loans, the Trustee alleges that WMC must have known that the loans were in breach of the representations and warranties at the time the loans were sold to the Trust. The Trustee asserts four causes of action for breach of contract – (1) breach of the representations and warranties about the mortgage loans; (2) breach of WMC’s obligation to repurchase breaching loans; (3) breach of WMC’s obligations to notify the Trustee when a loan breaches a representation and warranty; and (4) breach of WMC’s obligations to indemnify the Trustee for expenses incurred resulting from a representation and warranty breach. Complaint.
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RMBS trustee sues GE subsidiaries for $356 million
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