U.S. Bank Nat’l Ass’n v. Ibanez 458 Mass. 637 (2011) – The High Cost of Litigation
By Daniel Edstrom
DTC Systems, Inc.
This case is a fiasco beyond imagination. This boarded up house was the subject of the Massachusetts Supreme Judicial Court decision where US Bank as Trustee of a securitized trust lost in an attempt to obtain a judicial declaration of clear title. The investors now have an accounting that they can review. The losses keep coming month after month and may not be finalized for many more years. Here is what is being reported to the investors and ratings agencies as of February 2012:
Current Amt: $0.00
Paidoff: 9/2008
Last Report Date: 2/2012
Liquidation: $102,077
Curr Loss (as of 2/2012): $29,832.56
Cumulative loss: $274,340.89
Loss Severity (%): 268.76%
Original Amount: $103,500
The cumulative loss and loss severity are extremely high. This is not a record high for the amount or the loss severity percentage. But for a boarded up house that is probably not worth $100,000.00 it sure is quite a hit. Good thing there are still 440 or so loans in this trust with a current balance of over $88 million. That makes this small amount easy to swallow. In reality the loss amount is very low because the loan amount is low. Another loan in this same pool had a cumulative loss of $770,630.99 and a loss severity of 86.41%. The loan amount was $900,000.
Now for the real question. How does a loan for $103,500 actually cost the investors a loss of $274,340.89? Where does the “exta” amount come from to pay for the loss of this property?
