- Daily Zen
According to the reports released on 15th of October, a New York-based judge has limited the Assured Guaranty case against Credit Suisse Group AG. The lawsuit accused Credit Suisse Group for misinterpretation of the quality of the loans underlying the securities that were backed by mortgages that it insured.
The decision made by the court on the lawsuit of Assured Guaranty Corp. will in most likelihood be cited by some of the other lenders who are being sued by the insurers over the securities backed by mortgages that they might have guaranteed before the collapsing of the housing market. Shirley Werner Kornreich, the New York-based Justice of the Supreme Court, while ruling on a motion to dismiss the lawsuit of Assured Guaranty Corp. stated that the insurer of the bond was unable to recover its full amount of exposure in accordance to the policies. This was a result of the fact that Assured Guaranty Corp. accepted premiums after they came to know of the alleged breach. Assured Guaranty Corp. is prevented not only from repealing the policies but also from achieving the equivalent as rescissory damages. This was stated by Shirley while she limited the Assured Guaranty case in the court.
Assured Guaranty Corp. can however ask for compensatory damages due to the losses arising from some of the defective loans in spite of the fact that the court has limited the Assured Guaranty case. No immediate comment was available from the spokeswoman of Assured Guaranty Corp., Ashweeta Durani. Cases similar to the lawsuit of Assured Guaranty Corp. have also been brought up by the MBIA Inc. that sued its lenders like Ally Financial Inc., the Bank of America Corp. and Credit Suisse. Assured Guaranty Corp. has also sued some of its other lenders. It was last year that Assured Guaranty Corp. had sued Credit Suisse Securities (USA) LLC and Credit Suisse unit DLJ Mortgage Capital Inc. for alleged misinterpretations of nearly six transactions based on mortgage backed securities that took place in the years 2006 and 2007.
The lawsuit of Assured Guaranty Corp. said that Credit Suisse had failed not only in verifying the income and the employment but also in conforming to some of its underwritten guidelines. According to the insurer, they are exposed to claims amounting to nearly hundreds and millions of dollars because of the fact that nearly 93 percent of all the 7,918 mortgage loans that they had reviewed showed breached representations. As per the papers of the court, the transactions consisted of a principal loan balance that originally amounted to about $1.8 billion or £1.1 billion. In her decision the judge limited the Assured Guaranty case in the court and also dismissed any claims for consequential fees due to damages. She also dismissed the claim of Assured Guaranty Corp. that involved a breach of the contract that connected with AAA ratings.