Retained by Jones Day

NCUA, as liquidating agent of several defunct credit unions, bought an action against Wells Fargo Bank for its alleged breaches of contractual and statutory duties in its role as trustee for several RMBS trusts. NCUA alleged that Wells Fargo failed to provide notice of R&W breaches, enforce repurchase of loans breaching R&Ws, and address servicer breaches.

Vega supported Wells Fargo’s damages expert Dr. Cohen-Cole in analyzing the premises and assumptions of plaintiff’s expert’s damages calculations. He found these calculations relied on erroneous or unsupported assumptions and did not reflect damages to plaintiff arising out of Wells Fargo’s alleged failure to fulfill its duties as trustee.

With the assistance from the Vega team, Dr. Cohen-Cole prepared a 76-page report and 24 exhibits. Example analyses include:

Historical Repurchase Demand Fulfillment Using ABS-15G Data

In calculating repurchase damages, Plaintiff’s expert assumed that 100 percent of defective loans would have been repurchased had the trustee enforced the repurchase. Dr. Cohen-Cole did an empirical analysis to assess whether this assumption was consistent with historical repurchase activities. In assisting Dr. Cohen-Cole in performing this analysis, Vega collected more than 3,500 ABS-15 forms filed by RMBS securitizers with the SEC between January 1, 2012 and June 30, 2019. 

Beginning in 2012, the SEC required securitizers of asset backed securities to periodically file such forms, where the underlying transaction agreements contain a covenant to repurchase in the event of breaches of representations or warranties. These filings disclose, for each reporting period, the total number of repurchase demands made, fulfilled, rejected, withdrawn, disputed, and still pending. 

Based on this analysis, the historical repurchase rate was far lower than 100 percent. Indeed, only 4.5 percent of demands had been fulfilled, 0 percent of demands were still pending, and 7.8 percent of demands were still in dispute; the remainder had been rejected or withdrawn. Dr. Cohen-Cole found this evidence directly contradicted plaintiff’s expert’s assumption.

Analysis of Voting Rights Necessary to Direct Trustee Action

Governing agreements generally include provisions regarding the assignment of voting rights and minimum thresholds of voting rights necessary to direct trustee action. The trustee is prevented from making any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or documents, unless requested in writing to do so in certain circumstances.

Dr. Cohen-Cole analyzed plaintiff’s collective voting rights based on their ownership share in the relevant trusts and determined that they never exceeded the minimum threshold necessary to effectuate certain actions by the trustee. 

 Cohen-Cole Report and Exhibits (14-cv-10067)