Syncora Guarantee

Lehman Estate Settles Claims By RMBS Insurer and Trustee

and Posted on

 

On September 20, 2016, Judge Shelley Chapman of the U.S. Bankruptcy Court for the Southern District of New York approved the $37 million settlement of $1.3 billion in claims asserted against the estates of two defunct Lehman Brothers’ entities by Syncora Guarantee Inc. in its capacity as the insurer for certain certificates issued from the GMFT 2006-1 RMBS trust. After being sued by the GMFT 2006-1 Trustee for payment under the insurance policy, Syncora filed its own claim for indemnification against Lehman as sponsor of the securitization. In addition to settling Syncora’s claim, the agreement also releases Lehman from all potential claims brought by the GMFT 2006-1 Trustee, U.S. Bank NA, in exchange for Lehman’s cooperation in a separate lawsuit arising from GreenPoint Mortgage Funding Inc.’s alleged failure to repurchase defective loans. Settlement Order. Settlement Agreement Submitted For Approval.

Bankruptcy Court Enforces “No Action” Clause and Rules that Bondholders Lack Standing in Chapter 11 Case

Posted on

On August 28, Judge Burton R. Lifland of the Bankruptcy Court for the Southern District of New York held that an ad hoc group of bondholders did not have standing to object American Roads LCC’s plan or otherwise participate in its chapter 11 proceedings because the bondholders had delegated their rights to pursue remedies and take certain other actions under the applicable agreements to Syncora as bond insurer.  In re American Roads LLC., Case No. 13-12412 (BRL) (Bankr. S.D.N.Y. August 28, 2013).  The case involved what Judge Lifland described as a “unique financing structure known as an ‘insured unitranche,'” whereby all the secured claims are secured by the same lien under the same agreement with Syncora Guarantee as insurer.  Judge Lifland reasoned that bankruptcy courts have routinely held that a party lacks standing to take action where, as here, the party is subject to a “no action” clause pursuant to which that party delegated its rights to a third party.  Therefore, because the Court found that the prepetition intercreditor agreement that contained the no action clause was enforceable, the Court held that the bondholders did not have standing to participate in the debtors’ chapter 11 cases and overruled the bondholders’ objections to the debtors’ plan and disclosure statement.  Judge Lifland’s decision demonstrates that courts will continue to enforce strictly prepetition no action clauses in bankruptcy, and that creditors cannot participate in bankruptcy cases solely on account of their status as a parties-in-interest where they are subject to a no action clause.  Opinion.

Bank of America Settles Syncora RMBS Action for $375 Million

Posted on

On July 17, Bank of America agreed to settle a case brought in New York state court by insurer Syncora Guarantee for $375 million. The settlement also includes a transfer of assets from Syncora to Bank of America subsidiaries and a corresponding transfer of preferred shares, surplus notes, and other securities from Bank of America subsidiaries to Syncora. Syncora filed suit against Bank of America in 2009, alleging that Countrywide Financial misrepresented the quality of mortgages underlying securities that Syncora insured. Press Release.

Syncora Permitted to Prove its Breach Claims Without Showing That Alleged Breaches Caused Loans to Default

Posted on

On June 19, 2012, Judge Paul Crotty of the Southern District of New York granted in part Syncora Guarantee Inc.’s motion for partial summary judgment concerning the showing necessary to prove its claims for breach against EMC Mortgage Corporation. Syncora’s claims arise out of allegedly false representations and warranties concerning the quality of loans underlying $666 million in RMBS that Syncora insured. Without addressing the merits of Syncora’s claims, Judge Crotty ruled that Syncora does not need to prove that the alleged breaches caused any of the alleged defaults that occurred in the loans underlying the RMBS in order to prevail on its claim. Instead, proof that there had been a material breach would be sufficient to entitle Syncora to invoke its repurchase remedy under the parties’ agreement. Similarly, Judge Crotty ruled that Syncora could prove materiality by demonstrating that the breach increased Syncora’s risk of loss, and also ruled that Syncora did not need to prove that the breach caused a loan to default in order to prove materiality. The court held that inaccurate and incomplete information impacts an insurer’s decision whether to issue a policy and at what price and thus adversely affects the insurer’s interest as a matter of law. The court also denied Syncora’s request for a ruling that the court has the power in equity to award relief equivalent to rescission, which the court found would have required factual determinations for which there is no support in the record at this time. Order.

New York State Appeals Court Affirms Denial of BofA’s Motion to Sever and Consolidate Successor Liability Claims

Posted on

On April 5, 2012, a five-judge panel for the New York’s First Department intermediate appellate court affirmed a lower court’s ruling that denied Bank of America’s motion to sever successor liability claims brought against it from the primary claims in four separate actions brought by four monoline insurers. Bank of America had requested that, once severed from the underlying lawsuits, the successor liability claims should be consolidated into a separate proceeding for discovery purposes. The four insurers, Ambac Assurance Corp, Financial Guaranty Insurance Co, MBIA Inc, and Syncora Guarantee Inc., claim in their respective lawsuits that Countrywide ignored underwriting guidelines, resulting in loans that were riskier than had been represented to the insurers and thus subjecting the insurers to billions of dollars in insurance claims when the loans defaulted. They seek to hold Bank of America liable under theories of successor liability related to Bank of America’s acquisition of Countrywide. In affirming the denial of Bank of America’s motion, the appeals court reasoned that the four actions were at different stages of discovery and that consolidation would result in undue delay.  Order.

Syncora Guarantee Inc. Sues J.P. Morgan Securities LLC as Successor to Bear Stearns & Co.

Posted on

On June 6, 2011, Syncora Guarantee Inc. filed a complaint in New York state court against J.P. Morgan Securities LLC as successor to Bear Stearns & Co. Syncora’s complaint alleges that Bear, as underwriter of the GreenPoint Mortgage Funding Trust 2007-HE1, made false and misleading statements about the loan pool that fraudulently induced Syncora to issue a financial insurance gauranty policy for the trust. Further, Syncora alleges that J.P. Morgan has since interfered with the originator’s contractual obligation to repurchase loans that breached the originators representations and warranties. Syncora alleges it has paid more than $320.2 million in unreimbursed insurance claims owing to $404 million in losses for the GreenPoint Trust. Notably, Syncora alleges that it uncovered the evidence it cites to support its claim through ongoing federal litigation against the originator, EMC Mortgage Corp. Syncora Decision.

S.D.N.Y. Holds Monoline Insurer Can Pursue Pool-Wide Remedy Based on Sampling of Loans

Posted on

On March 25, 2011, Judge Paul A. Crotty of the Southern District of New York granted partial summary judgment to Syncora Guarantee, Inc., a monoline insurer, in a suit against Bear Stearns affiliate EMC Mortgage Corp. In that decision, Judge Crotty rejected EMC’s argument that the exclusive remedy available to Syncora for breaches of representations and warranties on Home Equity Line of Credit (“HELOC”) residential mortgage loans underlying the insured securitization was the repurchase of the individually identified, non-complying loans. Instead, the court, citing the broad rights and remedies for which Syncora bargained, accepted Syncora’s position that it “could seek a pool-wide remedy based on sampling and extrapolation.” Syncora Decision.