Residential Capital LLC for the most part must pursue lawsuits in federal court in Minnesota against lenders who sold it allegedly defective home mortgages, Bloomberg News reported yesterday. The former mortgage-servicing unit of Ally Financial Inc., which filed for chapter 11 protection in May 2012, won approval of a reorganization plan in December and started more than 80 lawsuits against so-called mortgage originators for breach of contract and other claims alleging that ResCap-purchased mortgages didn’t comply with advertised underwriting standards. More than 10 of those suits ended up before U.S. district judges in Manhattan. The remainder were in Minnesota. As a result of a series of decisions by different Manhattan judges beginning in July, it appears that most of the New York suits will be transferred to Minnesota, except where ResCap and the mortgage originator had agreed that suits could be filed in New York. The latest ruling was handed down on Oct. 10 by U.S. District Judge John G. Koeltl in New York in a case involving PHH Mortgage Corp., which sold ResCap almost $1 billion of mortgages. The mortgage-purchase agreements called for disputes to be litigated in courts in Minnesota.
