US Judge Upholds Assured Guaranty Suit
A federal judge on Wednesday [Feb.29] denied a motion by Flagstar Bank to dismiss a lawsuit by a Bermuda firm alleging that Michigan’s biggest bank breached a series of contracts insuring nearly $1 billion in loans in securities backed by home equity loans.
Assured Guaranty Municipal Corp., a subsidiary of Bermuda’s Assured Guaranty Ltd., alleged that the loans, made in 2005 and 2006, were riddled with fraud and misrepresentation. The suit, filed in April, seeks at least $82.4 million in damages.
Flagstar has more than $13 billion in assets.
On February 15, Judge Jed Rakoff of US District Court heard oral arguments over Flagstar’s motion seeking a summary judgment.
The judge denied that motion Wednesday and said he would issue an opinion explaining his decision “in due course.”
Both parties were instructed to join him in a conference call Monday to schedule a trial.
Last Friday, the US government announced that it had reached a $133 million settlement with Flagstar to end a lawsuit that alleged the bank’s mortgage unit had been involved in fraudulent lending practices.
The bank admitted to making false claims that caused the Federal Housing Administration to accept loans for insurance that were ineligible, resulting in losses by the US Department of Housing and Urban Development.
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.
