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.