In numerous pending lawsuits in New York federal and state courts, monoline insurers are suing Wall Street banks for alleged breaches of representations and warranties about the quality and characteristics of residential loans in RMBS pools. At stake in these suits is the ultimate responsibility for billions of dollars in losses suffered by RMBS certificate holders insured by the monolines. In most of these deals, the applicable MLPA, PSA and insurance contracts provide that the securitization’s sponsor must repurchase a loan if a breach of a representation or warranty “materially and adversely affects” the interests of the insurer in the loan. The fighting issue is whether this provision requires an insurer to prove that the alleged breaches of representations and warranties proximately caused the loan to become delinquent or default. Now, for the first time, a New York federal court has squarely addressed this critical question. READ MORE →