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Repurchase Lawsuits

DLJ sues Sunset Direct, Infinity & NetBank

April 2, 2007


A unit of Credit Suisse has joined other Wall Street firms in using the courts to enforce loan repurchase agreements with subprime lenders.

Separate lawsuits have been filed in the U.S. District Court for the Southern District of New York against Sunset Direct Lending and Infinity Home Mortgages by Credit Suisse-subsidiary DLJ Mortgage Capital.

In the suit against Lake Oswego, Ore.-based Sunset, which was filed on February 27, DLJ is seeking nearly $24 million of repurchases, Credit Suisse spokesman Pen Pendleton explained to MortgageDaily.com. The suit against Charlotte, W.V.-based Infinity, which was filed last December 21, seeks $3 million in repurchases.

Calls made by MortgageDaily.com to officials at Sunset and Infinity were not returned.

The Credit Suisse spokesman said in both cases the loans -- not all of them subprime -- became delinquent shortly after being purchased by DLJ, with some loans becoming delinquent within three months after purchase.

Noting that litigation over repurchases is nothing new, he said, "It's nothing different than what Lehman is doing, which is no different than what Bear Stearns did from the beginning."

Bear Stearns subsidiary EMC Mortgage Corp. last year filed in U.S. District Court in Dallas a $70 million suit against MortgageIT.

That suit charged MortgageIT, which was acquired by Deutsche Bank this past January, with failing to repurchase 587 subprime loans when the loans went into default or prepaid.

DLJ Mortgage has also sued subservicer NetBank for $4 million over the forwarding of payments and other charges. In the lawsuit, filed last December 15, Alpharetta, Ga.-based NetBank allegedly failed to forward borrower payments, neglected to pay mortgage insurance on loans and refused to comply with requests for information regarding the payments and proof of mortgage insurance, according to Pendleton.

NetBank spokesman Matthew Shepherd told MortgageDaily.com that the payments go back four and five years and that the issues have been in discussions for almost that long.

"As a general practice," he explained, "if we are subservicing for someone and there's a claim, and they were able to substantiate the claim, we would look into it and do the right thing."

He declined to say anything more specific.

Jerry DeMuth is an award winning journalist who has been reporting for four decades.

e-mail Jerry at [email protected]
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