Loan Servicer Cries Foul; Says Its Being Squeezed By Hedge Fund's Attempt To Jam Foreclosure Suit On 11,000 Unit Complex

In New York City, the New York Post reports:

• The company that controls troubled Manhattan apartment complex Stuyvesant Town-Peter Cooper Village told hedge fund Appaloosa to back off [], saying the New Jersey bondholder has no right to try to scuttle the property's foreclosure proceedings.

• In a brief filed with Manhattan federal court, CW Capital -- which represents holders of the $3 billion defaulted mortgage -- argued that the hedge fund must gain the support of 25 percent of bondholders to have a say in the foreclosure.

• CW also accused Appaloosa of trying to hold up the foreclosure to "maintain its stream of payments" on its bonds, which were bought "at a steep discount" when it was clear foreclosure was coming.(1) Late last month, David Tepper's hedge fund filed a motion to stop recent foreclosure proceedings on StuyTown, saying the move would hurt its investment.

Source: CW Capital: Back off, Appaloosa.

For the follow-up to this story, see The New York Observer: Hedge Fund to Special Servicer: Stop the ‘Revisionist History’ On Stuy Town:

• The hedge fund angrying up the waters in Stuyvesant Town's foreclosure has filed a testy response in federal court to the firm controlling the 11,200-unit property, complete with colorful legal vituperation.

(1) Until the foreclosure process is completed, the loan servicer is typically required to continue coughing up monthly payments to the investors in the mortgage backed securities, despite the fact that it no longer collects the mortgage payments from the complex's defaulting landlord. The longer the foreclosure process drags out, the longer the loan servicer gets squeezed.