Ally’s GMAC Is Sued by Insurer Over $1.2 Billion in Mortgage Securities
Units of Ally Financial Inc., the auto and home lender that received a government bailout, were sued by Financial Guaranty Insurance Co. for allegedly misrepresenting the quality of mortgage loans underlying securities that Financial Guaranty insured.
In suits filed yesterday in New York State Supreme Court in Manhattan, Ally Financial’s GMAC Mortgage and Residential Funding units are accused of breach of contract in connection with policies issued by New York-based Financial Guaranty related to about $3.8 billion worth of residential mortgage- backed securities.
GMAC Mortgage “fraudulently induced FGIC’s agreement to provide this insurance through willful and material misrepresentations and omissions concerning the nature of its business practices and the credit quality of tens of thousands of mortgage loans that provided the collateral” for securities, Financial Guaranty said in court papers.
FGIC Corp., the holding company for Financial Guaranty Insurance Co., sought bankruptcy protection from creditors in August 2010 after suffering losses from the drop in the U.S. housing market.
“There are substantial legal and factual defenses related to the FGIC claims and we intend to defend our position aggressively,” Gina Proia, a spokeswoman for Detroit-based Ally, said in an e-mail. “We have reviewed loan level ‘put- back’ claims from FGIC in the normal course as contractually required and have met our contractual obligations at all times, including repurchasing loans where a claim was valid.”
The cases are Financial Guaranty Insurance Co. v. GMAC Mortgage LLC, 653302/2011; Financial Guaranty Insurance Co. v. Residential Funding Co., 653303/2011; and Financial Guaranty Insurance Co. v. Residential Funding Co., 653304/2011, New York State Supreme Court, New York County (Manhattan).