As the economic crisis continues to impair the value of commercial mortgage-backed securities (“CMBS”) that collateralize loans to real estate investment trusts (“REITs”) to finance their investments, there is the prospect of increased margin calls, requiring REITs to provide additional funds to make up shortfalls in value. The case of AG MIT CMO, LLC et al. v. Royal Bank of Canada et al., which settled at the outset of the crisis, is worth examining for its echoes of the past and some important lessons going forward for REITs regarding the valuation of collateral and enforcement of rights under repurchase agreements.
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