|Among two lawsuits recently dismissed was one filed by Wachovia Corp. against a real estate investment trust. But a settlement by another REIT with borrowers in Washington state was only met with a similar lawsuit filed by California borrowers.Wachovia’s dismissal came just a day after Thornburg Mortgage returned $5.1 million it owed a Wachovia banking unit from a series of derivatives transactions.
Wachovia spokeswoman Christy Phillips-Brown said, “We received payment on the obligation and, as a result, we voluntarily dismissed the case.”
Thornburg is a Santa Fe, N.M.-based residential-mortgage REIT focused principally on the jumbo segment of the mortgage market.
Thornburg spokeswoman Suzanne O’Leary Lopez, said the company met its obligation in full and that the matter has been resolved. “We are pleased to put this matter behind us and to continue to focus on the fundamentals of our business,” she added.
Wachovia Bank filed the lawsuit last week in the U.S. District Court for the Southern District of New York, seeking more than $5.1 million plus interest and legal expenses for failure to honor derivatives contracts, including a series of interest rate swaps entered into in Oct. 2003.
The suit alleged that Thornburg, which had to recently halt new mortgage rate locks due to a secondary market freeze up for nonconforming mortgages, had breached an agreement between the two “by refusing to pay Wachovia” the amount due.
According to suit papers, “Thornburg Mortgage informed Wachovia that it intends to continue to pay other, unrelated counter parties with which it has established business relationships before it pays Wachovia.”
Another lawsuit, alleging violation of Florida’s “Do Not Call” law, has also been dropped.
Florida v. Global Mortgage Funding Inc. was dismissed because California-based Global Mortgage has declared bankruptcy, according to Terence McElroy, a spokesman for the Florida state department that filed the lawsuit. McElroy said the Leon County Circuit Court judge handling the case will allow the lawsuit to be re-opened after the bankruptcy proceeding ends.
NovaStar Financial, recently no stranger to litigation, is facing a lawsuit in federal court in San Francisco from California borrowers who claim the subprime mortgage lender charged them a higher interest rate on their loans because their mortgage brokers did not disclose the payment of yield spread premiums.
The California case, Kubiak, et al., v. NovaStar Mortgage, was filed in the United States District Court for the Northern District of California early this summer. The lawsuit comes on the heels of a settlement for $5.1 million for Washington homeowners who made similar accusations against the beleaguered subprime giant.
NovaStar, a REIT, has not yet filed a response in the California litigation.
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