2019 Year In Review: Securitization Litigation And Regulation

There were significant developments in 2019 as courts continued to issue important decisions in this space and significant legislation impacting the residential mortgage-backed securities ("RMBS") market came into effect.  A number of cases have called into question firmly rooted practices in the securitization market.  In two actions commenced over the summer in New York federal courts, Petersen v. Chase Card Funding, LLC¹ and Cohen v. Capital One Funding, LLC,² credit card holders claimed that their loans became usurious in violation of state usury laws once they were securitized.  While federal law permits the originating national banks to charge interest at rates above what is permitted under the usury cap of the borrower's residence (here, New York), the plaintiffs assert that the non-bank securitization trusts that purchased and then securitized the receivables (which do not benefit from the exemption for national originating banks from state usury laws) cannot