In the wake of the financial crisis, monoline insurers that guaranteed residential mortgage-backed securities have turned to state court in Manhattan to recoup billions they paid out in insurance claims on the soured investments. Insurers including Ambac, Assured Guaranty, MBIA and Syncora filed dozens of so-called put-back suits against the banks’ mortgage subsidiaries, alleging fraud and seeking to enforce repurchase agreements designed to force originators to buy back bad loans.
The defendants have found some success rebuffing the monolines’ fraud allegations. The question of whether the insurers have standing to assert contract claims under the repurchase agreements is less settled. But on Thursday, the New York State Appellate Division’s First Department unanimously affirmed a lower court decision dismissing breach of contract claims by Ambac against EMC Mortgage LLC, a Bear Stearns mortgage unit acquired by JPMorgan Chase & Co.
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