We saw the curtain drop on Walnut Place, aka Seth Klarman’s Baupost vs Bank of America Corp (NYSE:BAC), back in July. The hedge fund withdrew its challenge to the offer of a $8.5 billion settlement, and apparently decided to just take what it was offered. The last time, when Baupost decided to battle Bank of America Corp (NYSE:BAC) in court, it used the pseudonym of Walnut Place. This raised several confusions about the identity of the actual litigator behind the filing. It seems that Boston based Baupost Group has struck once again to regain its losses in mortagage backed securities.
Reuters reported an amended complaint that was filed on September 4th in the Delaware Chancery Court by Law Debenture Trust Company of New York. The complainant is a trustee for Bear Stearns MBS trust. The filing demands for the payment of 1,141 underlying mortgage loans from the EMC (Eastern Mortgage Capital) unit of JPMorgan Chase & Co. (NYSE:JPM). EMC used to be the mortgage lending unit of Bear Stearns. The complaint does not mention Baupost directly, but Reuters mentions that a relatively older status report clarifies the identity, “A representative of the directing certificateholders attended the meet-and-confer sessions on August 6 and 7,” the report said. “The directing certificateholders are the Ashford Square Entities, which are wholly-owned subsidiaries of funds managed by The Baupost Group.”
The filing asks for the repurchase, on grounds of misrepresentation of warranties by EMC. The litigation began in Feb 2011, and the amended complaint details specific stats and examples of how EMC overlooked the underwriting standards, and allowed unqualified borrowers into the business.
The lead complainant behind the put-back litigation was also confirmed by Harvey Wolkoff of Ropes & Gray, who is the lead counsel behind this new round of litigation. The amended complaint asks for a larger number of loans, while the previous filing sued for 800 loans. Baupost has been exploring the underlying MBS since 2009. Wolkoff has also commented on EMC’s lack of interest in leveling with the complaints, the EMC unit has only agreed to buy back some 54 loans, when the actual filing now asks for repurchase of over 1000 underlying mortgages.