On October 17, 2011, Assured Guaranty Municipal Corp. filed a lawsuit in the Supreme Court of New York against DLJ Mortgage Capital, Inc. and Credit Suisse Securities for breaches of mortgage representations and repurchase obligations in connection with six RMBS. Assured, which insured the securities, alleges that DLJ warranted and vouched for the quality of the loans and agreed to repurchase, substitute, or cure any loans that breached the warrantees. Assured also alleges that its forensic re-underwriting review revealed that 93% of the underlying loans did not meet the agreed-upon qualifications. Assured asserts claims for breach of contract and declaratory judgment. Complaint.
Assured Guaranty Municipal
New York State Court Allows Third-Party Suit By Deutsche Bank Against Originator
On July 25, 2011, Justice Shirley Kornreich of the Supreme Court of the State of New York denied Greenpoint Mortgage Funding’s motion to dismiss Deutsche Bank’s complaint against it for indemnification of any damages awarded against it or other costs arising in a suit by Assured Guaranty Municipal Corp. Assured originally sued a subsidiary of Deutsche Bank for alleged breach of the insurance and indemnity policy covering $352 million in mortgage-backed securities. Assured’s complaint claimed that the mortgages contained in the RMBS were riskier than Deutsche Bank represented and that borrower fraud was rampant. Deutsche Bank, in turn, sued Greenpoint, claiming the originator was at fault for misrepresenting the quality of the mortgages. Greenpoint claimed that its agreement with Deutsche Bank prohibited the suit because it was only obligated to cover losses “resulting from” a breach of its representations and that certain conditions precedent to suit had not been met. Justice Kornreich held that the agreement was sufficient to cover Deutsche Bank’s losses, and (Deutsche Bank had provided Greenpoint sufficient notice of the alleged breach before filing suit. Decision.