Moody’s noted it cautioned in June this scenario might lead to “free-for-all financing” as certificate-holders plead their own cases, bypassing the natural filtering process of the trustee and servicers. Because of the implications, Moody’s said at the time any judge would be unlikely to pursue that option.
“Judge [James] Peck may return to his initial skepticism and rule on later substantive motions the way all market participants, even the certificateholders now attempting opportunistically to bypass the trust structure, thought the rules would work when the ESH transaction went out the door,” Rubock said. “Or me may not, and we may need to rethink how robust many structures are — from trusts to participants — under the extreme tests to come.”
Probably not a big deal at this stage, but maybe it sets a new precedent for other workouts down the road.