Mortgage Securitization Trust is a Trust

Originally published by David Coale.

In a thorough review of several basic issues that arise in litigation about residential foreclosures, the Fifth Circuit addressed whether the citizenship of a mortgage securitization trust is determined by the citizenship of the trustee, or the citizenship of all the trust’s interest holders. While the traditional rule is that the citizenship of the trustee controls, Navarro Savings Ass’n v. Lee, 446 U.S. 458 (1980), the borrower argued that a more recent case about the citizenship of a REIT should control, Americold Relay Trust v. Conagra Foods, 136 S. Ct. 1012 (2016). Because the defendant bank was sued in its capacity as trusteee, and because the terms of the Pooling and Service Agreement assigned “real and substantial” control to the bank, the Court elected to follow Navarro. Bynane v. The Bank of New York Mellon, No. 16-20598 (August 4, 2017) (Navarro was sucessfully argued in the Supreme Court by my former law partner James Ellis, an excellent lawyer and as shown above, a star quarterback at Texas Tech in the early 1960s).

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