Connecticut: Repurchase Agreement Applies to Fraudulent Loans that have been Declared Invalid

Posted on Thursday, May 04, 2006

by Geoffrey Milne
Hunt Leibert — USFN Member (CT)

The Connecticut appellate court issued a ruling permitting a damage award for the failure of a loan originator to repurchase a fraudulent loan that was declared invalid by the trial court [Valentin v. Community Remodeling Company, Inc., 90 Conn. App. 255 (2005)].

In the case, a borrower sued the original lender and its assignee, claiming that a $419,697 mortgage loan was fraudulent. The trial court declared the loan to be null and void, and on that basis declined to award damages for the loan amount on a cross-claim by the assignee against the loan originator, in accordance with a contractual indemnification agreement.

The Connecticut appellate court reversed and held that under the plain language of the indemnification agreement, the trial court was obligated to award damages in accordance with the measure set forth in the contract regarding repurchase.

This judicial decision is very useful to lenders who are seeking to enforce repurchase obligations in mortgage fraud cases, as the original lender in this case ignored that commitment.

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