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bofavwellsfargo

bofavwellsfargo

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Published by Foreclosure Fraud

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Published by: Foreclosure Fraud on Dec 09, 2012
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01/15/2013

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USActive 27104550.15
 
UNITED STATES DISTRICT COURTNORTHERN DISTRICT OF ILLINOIS
BANK OF AMERICA, NATIONAL )ASSOCIATION, as successor by merger )to LASALLE BANK NATIONAL )ASSOCIATION, ) Case Number:)Plaintiff, )) Judge:v. )WELLS FARGO BANK, N.A., in its )Capacity as Trustee for the ) Magistrate Judge:Certificateholders of Commercial Mortgage )Pass-Through Certificates, Series )2006-MF4, Acting by and through )MIDLAND LOAN SERVICES, ))Defendant. )
 COMPLAINT
Plaintiff, BANK OF AMERICA, NATIONAL ASSOCIATION (“Plaintiff” or “Bank of America”), as successor by merger to LaSalle Bank National Association (“LaSalle”), by and through its attorneys, John M. Riccione, William J. Serritella, Jr. and Amy M. Rapoportof Aronberg Goldgehn and Gregory A. Markel and Jason M. Halper of Cadwalader, Wickersham& Taft LLP, alleges for and as its complaint (the “Complaint”) as follows:
NATURE OF THE ACTION
1.
 
Bank of America has commenced this action to resolve an actual disputeinvolving an improper attempt by Wells Fargo Bank, N.A. (“Wells”) to rescind a transactionconsummated almost six years ago involving the sale and securitization of a pool of hundreds of mortgage loans by demanding that Bank of America repurchase all of the remaining loans in the pool
notwithstanding the fact that most of the loans at issue are performing 
 
in accordance with
Case: 1:12-cv-09612 Document #: 1 Filed: 12/03/12 Page 1 of 45 PageID #:1
 
 -2-
USActive 27104550.15
 
their terms
(i.e., the borrowers of the loans are paying their mortgages as payments are due).Indeed, the vast majority of the loans in the pool at issue either is current or already has been paid off completely.2.
 
Wells is the trustee for the holders of Commercial Mortgage Pass-ThroughCertificates, Series 2006-MF4 (“MF4”). The MF4 certificates (“Certificates”) are bonds thatgive the holders (“Certificateholders”) rights to certain periodic payments from the MF4securitization trust, which owns several hundred small-balance
1
multi-family mortgage loansoriginally made by LaSalle’s Multifamily Finance Group (“MFG”). The MF4 securitizationtransaction is governed by a Mortgage Loan Purchase Agreement, dated December 20, 2006(“MF4 MLPA”) and a Pooling and Servicing Agreement, dated December 1, 2006 (“MF4PSA”).3.
 
In this dispute, Wells is acting by and through the special servicer for theMF4 trust, Midland Loan Services (“Midland”). Wells, acting by and through Midland, is alsoreferred to herein as “Defendant.” By letter dated September 5, 2012 (the “September DemandLetter”), Midland demanded that Bank of America repurchase by the end of the Initial CurePeriod “all loans in the MF4 securitization other than those that have been paid off as agreed”(“Loans” or “Mortgage Loans”) alleging breaches of various representations and warranties inthe MF4 MLPA that Midland claims arise from alleged “systemic flaws” in the way that MFGunderwrote the Loans.
2
But Defendant’s demand that Bank of America repurchase all the Loans
en masse
, and thereby rescind the MF4 securitization transaction, is not permitted by the
1
“Small-balance” loans are typically loans that are $1 million or less.
2
Under the MF4 PSA and MF4 MLPA, the Initial Cure Period is 90 days after receipt of notice of thealleged breach, which, for the “systemic flaws” claims raised in the September Demand Letter would beDecember 4, 2012. For the claims made in the supplemental letter of November 30, 2012, the end of thecure period would be February 28, 2013.
Case: 1:12-cv-09612 Document #: 1 Filed: 12/03/12 Page 2 of 45 PageID #:2
 
 -3-
USActive 27104550.15
 controlling transaction documents or by applicable law.4.
 
In essence, Defendant is seeking to rewrite the governing contracts andrescind the MF4 transaction without having to satisfy the explicit, agreed-upon requirements and procedures under the relevant contracts that apply to each
individual 
Loan as to whichrepurchase is sought. More specifically, among the requirements to compel a repurchase of anyof the Loans is that Defendant demonstrate (1) that LaSalle materially breached a representationit made in the contracts governing its sale
of the particular Loan
in question
and 
(2) that thismaterial breach caused a material adverse effect on the value of the individual Loan at issue, thevalue of the mortgaged property serving as collateral for the Loan at issue (“MortgagedProperty”) or the interests of the Certificateholders in such Loan or property. Because thegoverning documents require Defendant to demonstrate a material breach and a material adverseeffect with respect to
each and every Loan
for which it seeks repurchase, the documents simplydo not allow for a blanket demand like the one Midland has made. This contractual requirementis logical because, among other reasons, it prevents Defendant from demanding the repurchase of  performing loans—loans that by definition have not been materially or adversely affected by a breach of any representation or warranty.5.
 
If the Court resolves this issue and determines that any repurchase claimmust be resolved on a loan-by-loan basis, there will be no need for this Court to resolve whether Defendant’s allegations of “systemic flaws” are correct and, in fact, they are without merit. In2011, a jury in Oklahoma implicitly rejected Defendant’s theory that all of LaSalle’s MFGunderwriting was compromised by these alleged “systemic flaws.” In that case, which related tothree loans underwritten by LaSalle’s MFG program during approximately the same time periodas is at issue here, and involving loans cherry-picked by the plaintiffs to be included in that case,the jury rejected Wells’ claim and refused to require Bank of America to repurchase one of the
Case: 1:12-cv-09612 Document #: 1 Filed: 12/03/12 Page 3 of 45 PageID #:3

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