Assured Guaranty Sues Credit Suisse, DLJ Mortgage in New York State Court
A Credit Suisse Group AG (CSGN) unit was sued by over securitized mortgage loans for which Assured Guaranty Ltd. (AGO) guaranteed payments to investors and that the bond insurer says were riskier than promised.
Credit Suisse’s DLJ Mortgage Capital Inc. misrepresented the quality of loans underlying the mortgage securities, exposing Assured to “hundreds of millions of dollars” in current and future claim payments, Assured units said in a complaint filed yesterday in New York state Supreme Court.
“Assured is exposed to enormous current and future claims under the policies,” they said.
Credit Suisse spokesman Steven Vames said in an e-mailed statement that the company would fight Assured’s attempt to “misuse litigation to sidestep its insurance responsibilities and shift its own exposure to others.” Credit Suisse Securities (USA) LLC is also named as a defendant.
“Assured is a sophisticated multibillion dollar insurance company that received full disclosure about the securities they chose to insure,” he said. “Now that investors have suffered losses, Assured has chosen to file a lawsuit to evade its insurance obligations.”
Assured is among bond insurers including MBIA Inc. (MBI) that are suing lenders from Bank of America Corp. (BAC) to Deutsche Bank AG (DBK) over mortgages packaged into securities and backed by the insurers.
Seeking Buybacks
Assured Chief Executive Officer Dominic Frederico said on a conference call with investors in May that it was seeking buybacks from Credit Suisse, Deutsche Bank and UBS AG (UBSN) on $5.4 billion of loans he said violated so-called representations and warranties made by the banks.
Assured said in the complaint against DLJ that the company “repeatedly and pervasively” breached representations about the loans and that a “massive number” of defective mortgages were packaged into securities.
In six mortgage securitizations for which Assured provided financial guaranty insurance, a review by the company found 7,338 defective mortgage loans with an aggregate original principal balance of about $1.8 billion, according to the complaint.
The case is Assured Guaranty Municipal Corp. v. DLJ Mortgage Capital Inc, 652837-2011, New York state Supreme Court (Manhattan).
To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net.
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.
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