Burr & Forman

03.7.2017   |   Articles / Publications

American Bankruptcy Institute Journal: Road Map to Defending Constructive Fraudulent Transfers to Servicers of MBS Loans

In an article published in the March 2017 issue of the American Bankruptcy Institute Journal, Jonathan Sykes and Correy Karbiener provide guidance on how Section 546(e) of the Bankruptcy Code can be used to defend against a trustee seeking to avoid a constructive fraudulent transfer made in connection with an MBS loan. Sykes and Karbiener explain that Section 546(e) of the Bankruptcy Code provides a safe harbor from a bankruptcy trustee’s avoiding powers, as long as the mortgage payment is made “in connection with a securities contract” and “by or to (or for the benefit of)” an enumerated entity under the statute. Even if the court follows a narrow interpretation of Section 546(e) that requires the transfers be made “to” an enumerated entity, a servicer can successfully argue that it accepts mortgage payments as a mere conduit of the transfers, which were actually made “to” the trust, and that the securitized trust is the actual “transferee” of mortgage payments made on account of MBA loans.

For the full article, subscribers to the American Bankruptcy Institute Journal may click here.

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