On September 19, 2023, Justice Crane of the New York County Commercial Division issued a decision in HSBC Bank USA, N.A. v. Nomura Credit & Capital, Inc., 2023 NY Slip Op. 33252(U), dismissing a claim against Ocwen for failing to give Nomura notice of representation and warranty breaches because Normura would have refused to cure any breaches of which it was given notice, explaining:
Nomura’s [third-party] claim based on failure to notify relies on the theory that Ocwen breached PSA § 2.03 through failing to notify Nomura of breaches of the representations and warranties. The parties argued at length in their papers and at oral argument about whether Ocwen had actual knowledge of alleged breaches of representations and warranties, was willfully blind to those breaches, or had any obligation to notify Nomura of the breaches. However, the court need not decide those issues, because Ocwen has established that it is entitled to summary judgment on this cause of action. This is because, even if Ocwen had knowledge and provided the notice Nomura is claiming was required, Nomura would never have exercised its repurchase option. Thus, Ocwen has established that Nomura is unable to show damages.
In the underlying actions, HSBC is suing Nomura, in part, for Nomura’s failure to execute the repurchase remedy for loans that allegedly breached the representations and warranties. In the underlying actions, Nomura has denied that it was under any repurchase obligation because HSBC has failed to establish breaches that materially and adversely affect the interests of the certificateholders. Yet, in the third-party action, Nomura argues that if the court were to find that the loans were in breach, the servicers are liable because if the Servicers provided Nomura with prompt notice sooner Nomura would have had the opportunity to address such notices and engage in a dialogue with the Servicers to determine if repurchase was warranted.
The evidence in the record shows that Nomura would not have repurchased the loans in any event. In particular, Ocwen has shown that HSBC provided a number of unheeded pre-litigation notices of breach to Nomura related to loans at issue here. Samuel Warren’s expert report that Ocwen submitted with their motion related to the 2007-2 certificates describes the assumption that, if Ocwen had provided notice of the breaches to Nomura, Nomura would have repurchased the loans as not justified because HSBC previously provided repurchase demands for 336 of the 479 loans factored into Nomura’s damages calculations for failure to notify, none of which Nomura repurchased. The Warren report further describes how Nomura again received notice of potential breaches of its representations and warranties once the Trust’s litigation was filed on January 30, 2013 but has continued to refuse to repurchase the Claim Loans despite having had the opportunity to thoroughly evaluate whether it materially breached its representations and warranties. As a further example, Ocwen refers to the deposition testimony of Nancy Prahofer, Nomura’s own witness, who admitted that Nomura refused to repurchase a loan even after Ocwen alerted Nomura that the loan was defective and attached an affidavit of the purported borrower attesting that their identify had been stolen and that they did not purchase a home.
Nomura’s response to the compelling and undisputed evidence that Nomura has refused to exercise the repurchase remedy for the loans at issue-and continues to refuse to do so to this day-is essentially that HSBC provided notice of the alleged breaching loans en masse and far too close to the expiration of the statute of limitations, and that if Ocwen had provided notices of breach piecemeal, in the ordinary course of business, maybe Nomura would have repurchased.
The argument is far-fetched. Nomura has presented no evidence to suggest that it would have repurchased any loans at issue if it had been provided with the repurchase demands during the ordinary course of servicing. On the contrary, Ocwen refers again to the deposition of Prahofer, who testified definitively that Nomura would not repurchase loans if it disagreed as to whether or not there was a breach absent a court ruling to do so . . . .
Thus, according to Prahofer, whether or not Nomura would repurchase the loans at issue depends on how the court rules in this litigation, and it would not have volunteered to give money for nothing. Further, contrary to Nomura’s claim that it may have exercised the repurchase protocol if it had received notice in the ordinary course of business, Prahofer testified that the determination of whether or not a loan breached the representations and warranties would be the same regardless of when the determination was made . . . .
Because Nomura has failed to rebut Ocwen’s prima facie showing that Nomura would never have repurchased the relevant loans and has no damages, the court grants summary judgment to Ocwen on the second cause of action in the third-party complaint for breach of contract based on failure to notify. Whether or not Ocwen had knowledge of or failed to notify Nomura of any potential breaches of the representations and warranties in accordance with the PSA does not matter. The unrefuted evidence shows Nomura’s decision not to repurchase would have remained either way.
(Internal quotations and citations omitted).