In 2011, the U.S. Court of Appeals for the Third Circuit (in In re American Home Mortgage Holdings, 637 F.3d 246 (3d Cir. 2011)) (AMH II) affirmed the Delaware Bankruptcy Court’s holding in In re American Home Mortgage Holdings, 411 B.R. 181 (Bankr. D. Del. 2009) (AMH I) that, in distressed or dysfunctional markets, the discounted cash flow (DCF) method is an appropriate method to value mortgage loans posted as repo collateral, and therefore, to fix the claim for damages of the non-debtor repo counterparty under §562 of the Bankruptcy Code.
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