Federal Court Issues Second Decision Jeopardizing Historical Treatment of Pass-Through Mortgage-Backed Securities

On December 7, 2012, a second judge of the Southern District of New York issued a decision holding that the Trust Indenture Act (TIA) applies to pass-through mortgage-backed securities certificates, Policeman's Annuity and Benefit Fund of the City of Chicago v. Bank of America, NA, et al., --- F. Supp. 2d ---, 2012 WL 6062544 (S.D.N.Y. Dec. 7, 2012). After the first such decision, in April 2012, we cautioned that thousands of trusts have issued trillions of dollars in mortgage-backed pass-through certificates on the understanding that they are not subject to the TIA, and that the district court's decision to the contrary could prove disruptive.