March 26 (Bloomberg) -- Royal Bank of Scotland Group Plc, Britain’s biggest taxpayer-owned lender, was sued by a bond insurer over what it claims was the bank’s sale of $1.15 billion of securities backed by “thousands of defective and fraudulently originated” home loans.
The insurer, Assured Guaranty Municipal Corp., sued RBS in federal court in Manhattan today, alleging that it expects to pay $100 million in claims by investors in the securitization, Soundview Home Loan Trust 2007-WMC1.
Assured claimed in its complaint that the loans, which were originated by WMC Mortgage Corp., failed to adhere to claimed lending standards. Investors lost money when many of the mortgages defaulted, causing the certificates to drop from AAA-rated to junk status, according to the insurer. Assured said it insured interest and principal payments on $291 million of the Soundview certificates.
“RBS Financial Products purchased and securitized the mortgage loans for the Soundview transaction without regard for the fact that WMC routinely ignored its stated underwriting guidelines and originated mortgage loans without regard to the borrowers’ ability to repay,” Hamilton, Bermuda-based Assured said in the complaint.
Ed Canaday, a U.S. spokesman for Edinburgh-based RBS, declined to comment on the suit.
The case is Assured Guaranty Municipal Corp. v. RBS Securities Inc., 13-cv-2019, U.S. District Court, Southern District of New York (Manhattan).
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