McKool Smith Secures Victory in RMBS Trust Case

NEW YORK, Sept. 18, 2026 /CourierPR/ -- McKool Smith, a leading trial firm based in the United States, has secured a significant victory in a residential mortgage-backed securities (RMBS) trustee proceeding. The New York Appellate Court has affirmed a lower court ruling in favor of junior bondholders, including LA Verdad Holdings, LLC, Robert Dechert, and 400 Capital Credit Opportunities Master Fund. The decision pertains to 34 RMBS trusts and involves approximately $400 million in principal recoveries.

The case centered on mortgage principal that servicers deferred when modifying homeowners' loans under the U.S. Treasury's Home Affordable Modification Program (HAMP). The agreements governing the trusts were written before HAMP existed and did not address deferred principal. Servicers reported these deferrals as realized losses, leading the trustee, Wells Fargo, to write down certificate balances in reverse order of seniority, often to zero. When borrowers later repaid the deferred principal, the question became how to account for those payments.

In a unanimous decision, the New York Supreme Court, Appellate Division, First Department upheld Justice Andrew Borrok's July 2025 post-trial ruling. The court held that although the payments do not fit squarely within the contractual definition of "Subsequent Recoveries" under most of the agreements, they should be treated as such in light of the structure of the agreements and the parties' course of performance. The court found that the trustee had consistently treated the payments as Subsequent Recoveries, a practice evident from monthly remittance reports, and no investor objected to this approach.

The decision caps a series of rulings McKool Smith has secured for investors on the treatment of HAMP deferred principal. In August 2023, the firm won summary judgment in California for investors in trusts administered by Deutsche Bank National Trust Co. Four months later, Justice Borrok ruled for the junior bondholders in this proceeding on summary determination. The First Department held that the agreements were ambiguous and directed that the question be resolved at trial. McKool Smith tried the case and won again. Today, the First Department affirmed that judgment.

The McKool Smith team included Principals Jennifer Truelove, Daniel Hendler, and David Schiefelbein, along with Associates Hal Shimkoski and Lauren Simenauer. The firm, known for its expertise in complex commercial litigation, has a strong track record, having secured 18 nine-figure jury verdicts and 16 eight-figure jury verdicts, more than any other law firm according to The National Law Journal "Top 100 Verdicts."

The case is Matter of Wells Fargo Bank, N.A. v. HBK Master Fund L.P., Case No. 2025-04773 (N.Y. App. Div. 1st Dep't Sept. 17, 2026), on appeal from Index No. 154984/2021 (N.Y. Sup. Ct.).

McKool Smith, with more than 130 trial lawyers across offices in Austin, Dallas, Houston, Los Angeles, Marshall, New York, and Washington, D.C., continues to establish itself as a leading trial firm in the United States.