The Court of Appeals recently issued the latest in a series of decisions construing the application of New York’s statute of limitations to residential mortgage backed securities (RMBS) claims. In Deutsche Bank National Trust Company v. Flagstar Capital Markets Corporation, the court addressed the interplay between competing public policies of the freedom to contract and the prohibition on pre-accrual agreements to extend statutes of limitation. In doing so, the Court of Appeals reaffirmed the principle it established in Ace Securities Corp. Home Equity Loan Trust, Series 2006-SL2 v. DB Structured Prods., 25 N.Y.3d 581 (2015) (Ace), that an RMBS breach of contract claim accrues at the time that the allegedly breached representations and warranties were made.

Defendant Quicken Loans was the originator of certain mortgage loans that it sold pursuant to a June 2006 Mortgage Loan Purchase and Warranties Agreement (MLPWA). The mortgage loans were eventually sold into a trust for the purpose of issuing RMBS backed by the loans. Plaintiff Deutsche Bank National Trust Company serves as trustee of the trust and is entitled to enforce the rights of the mortgage loan purchaser under the MLPWA. In the MLPWA, Defendant made a number of representations and warranties concerning the characteristics and quality of the mortgage loans “as of the related Closing Date for such Mortgage Loan.” The latest closing date for any of the loans was May 31, 2007. Plaintiff commenced this action by filing a summons with notice on Aug. 30, 2013 and filed its complaint on Feb. 3, 2014. The complaint alleged that defendant breached the MLPWA by selling mortgage loans that did not comply with the representations and warranties.

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