Assured Guaranty Sues JPMorgan Units
A US subsidiary of Bermuda bond insurer Assured Guaranty Ltd. has sued JPMorgan Chase & Co.’s EMC Mortgage and Bear Stearns units in New York state court, accusing them of making misrepresentations to market mortgage-backed securities.
The Bloomberg financial news service reported yesterday [Mar.15] the lawsuit was brought in connection with a mortgage-backed securities transaction known as SACO I Trust 2005-GPI, sold in September 2005, which has experienced cumulative losses of more than $75 million.
The losses resulted in more than $43 million in claims to be paid by Assured Guaranty Corp.
“The transaction that Bear Stearns marketed and effectuated based on its materially false and misleading representations and disclosures has failed miserably,” Assured Guaranty said in its complaint. “An overwhelming percentage of the loans that Bear Stearns securitized in the transaction either have been written off as total losses or are severely delinquent.”
EMC Mortgage was a unit of Bear Stearns Cos. until the investment bank was bought by JPMorgan in 2008.
Pools of home loans securitised into bonds were a central part of the housing bubble that helped send the US into the biggest recession since the 1930s.
The housing market collapsed, and the crisis swept up lenders and investment banks as the market for the securities evaporated.
Assured Guaranty Ltd. is a Bermuda-based holding company that provides, through its subsidiaries, credit protection products to the United States and international public finance, infrastructure and structured finance markets.
The company has two segments: financial guaranty direct and financial guaranty reinsurance. The company’s financial guaranty direct and financial guaranty reinsurance businesses provide credit enhancement, or principal and interest payment default protection, on public finance/infrastructure and structured finance obligations.
AGL’s principal operating subsidiaries include Assured Guaranty Corp, Assured Guaranty Municipal Corp. and Assured Guaranty Re Ltd.
The company primarily conducts its business through subsidiaries located in the Bermuda, the United States and Europe.
