On May 29, 2014, Justice Bransten of the New York County Commercial Division issued a decision in Saco I Trust 2006-5 v. EMC Mortgage LLC, 2014 NY Slip Op. 31432(U), ruling that Plaintiffs’ claim for rescissory and consequential damages was precluded by a “sole remedies” provision in the governing documents for a mortgage-backed securities investment.
In Saco I Trust, the plaintiff investors in mortgage-backed securities brought an action against the sponsor, EMC, for breaches of representations and warranties concerning the mortgages underlying the investment. The governing documents for the securitization trusts contained a “sole remedies” clause, which provided:
It is understood and agreed that the obligation under this Agreement of EMC to cure, repurchase or replace any Mortgage Loan as to which a breach has occurred and is continuing shall constitute the sole remedies against EMC (in its capacity as Sponsor) respecting such breach available to the Certificateholders, the Depositor or the Trustee.
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