A mortgage loan repurchase facility (more casually referred to as a "repo") is a financing structure commonly utilized to finance mortgage loans. These facilities are utilized by both residential and commercial mortgage loan originators and aggregators to finance mortgage loans that they originate or acquire. The structure is favored by liquidity providers in the mortgage loan finance arena due to its preferential "safe harbor" treatment under the United States Bankruptcy Code (the "Bankruptcy Code"), as further described below.
On April 9, 2013, Ambac Financial Group, Inc. (“Ambac”) submitted a proposed settlement with the United States to the U.S. Bankruptcy Court for the Southern District of New York. If approved, the proposed settlement would resolve more than two years of litigation concerning the tax treatment of losses sustained by Ambac in connection with credit default swap contracts entered into during the 2008 financial crisis. The settlement would result in a payment by Ambac to the Government of $101.9 million, as well as possible future additional payments of up to $14.9 million.
In another recent private letter ruling,19 the IRS ruled that an ownership change pursuant to a bankruptcy reorganization plan qualified for an exception to the general rule limiting net operating loss ("NOL") carryforwards under Section 382(a).