Fannie Mae, Freddie Mac, and the MBS sleeper defense

On Friday, Skadden, Arps, Slate, Meagher & Flom filed a new brief in what is shaping up as the fight that will make the statute of repose a household phrase. I'm kidding, but not entirely. On behalf of UBS, Skadden filed a reply to the Federal Housing Finance Authority that lays out exactly why, in the bank's view, the conservator overseeing Fannie Mae and Freddie Mac didn't sue UBS for alleged MBS failings in time to comply with the statute of repose.

As I've explained, UBS is the lead case in FHFA's MBS onslaught against more than a dozen MBS issuers, so Skadden's argument on the statute of repose will have huge consequences. Essentially, the firm contends that when Congress enacted the law that created FHFA and sent Fannie Mae and Freddie Mac into conservatorship, it explicitly extended the statute of limitations on Fannie and Freddie's state law tort and contract claims, but did not address the statute of repose at all. And because the FHFA waited at least four years to sue UBS over mortgage-backed securities purchased by Fannie and Freddie, its federal securities claims should be barred the three-year statute of repose, according to Skadden.

FHFA's lawyers at Quinn Emanuel Urquhart & Sullivan argued in a Feb. 10 opposition to UBS's dismissal motion that the statute of repose dates from the creation of FHFA, not the purchase date of the securities. Moreover, they argued, Congress (like my learned Reuters colleagues) is more familiar with the statute of limitations than the statute of repose, so when it extended the statute of limitations in the law establishing the FHFA, it meant, by extension, to extend the statute of repose as well. "Congress's consistent use of the term 'statute of limitations' to encompass all time limitations, including what courts describe as 'statutes of repose,' makes clear that Congress gave FHFA at least three years after it was appointed conservator to file suits asserting claims like those here," the brief said. (FHFA counsel Philippe Selendy of Quinn declined an email request for comment.)

Read more: http://newsandinsight.thomsonreuters.com/New_York/News/2012/02_-_February/Fannie_Mae,_Freddie_Mac,_and_the_MBS_sleeper_defense/