| Delayed Loan Purchases Litigated
EMC sued by ECC subsidiary April 5, 2007 By SAM GARCIA |
| A Bear Stearns subsidiary has been sued over claims it delayed the purchase of subprime mortgages — driving down the value of the loans.
Performance Credit Corp. filed the lawsuit in the Central District of California, Southern Division, against mortgage servicer EMC Mortgage Corp., according to a filing Wednesday with the Securities and Exchange Commission. In February, Bear Stearns, the parent of EMC, acquired the wholesale mortgage operations of Performance’s parent, ECC Capital Corp. — which was operating in a downward spiral. Performance alleges EMC had agreed to purchase and securitize all of Performance’s monthly loan production and assume responsibility for any early payment defaults. But because EMC delayed the acquisition of loans originated from Oct. 10 to Feb. 9, Performance claims it lost more than $20 million from a decline in the value of the loans. “Based on our preliminary review, we believe this case is without merit,” Renu K Aldrich, head of Bear’s fixed income communications, told MortgageDaily.com in an e-mail statement. “We intend to put forth a vigorous defense.” Performance is also seeking $5 million through arbitration from EMC amid allegations of loan servicing agreement breaches. “EMC breached the servicing agreement by failing to act diligently to collect all payments due under each of the mortgage loans required to be serviced and otherwise to perform its obligations under the servicing agreement,” the filing said. Performance acknowledged legal costs “may have a material effect” on its operations, while Bear “has significantly more resources” to sustain prolonged litigation. |
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