Commercial Litigation and Arbitration

Lender’s Recovery under Credit Default Swap Does Not Constitute a Double Recovery Precluding It from Enforcing the Underlying Loan

From Zambrano v. HSBC Bank USA, Inc., 2010 U.S. Dist. LEXIS 51371 (E.D. Va. May 25, 2010):

Plaintiff asserts a "double recovery" theory based on an incorrect understanding of credit default swaps, "credit enhancements," and loan securitization. According to Plaintiff's theory, Defendants may have received a credit "payoff" or swap upon Plaintiff's default. Therefore, the foreclosure on the Property resulted in a double recovery. Plaintiff's double recovery theory fails because it is unsupported by any factual allegations and is contrary to law.

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