Southern District Judge Jed Rakoff (See Profile) last week ordered Flagstar Bancorp Inc. to pay monoline bond insurer Assured Guaranty Municipal Corp. $90.1 million plus attorney fees following a bench trial in a lawsuit accusing Flagstar of misrepresenting the risks associated with mortgage-backed securities.
The case, Assured Guaranty v. Flagstar Bank, 11-2375, is widely seen as a bellwether for a slew of similar lawsuits filed by insurers against the issuers of mortgage-backed securities. Bond insurers, which insured tens of billions’ worth of mortgage backed securities before the financial crisis, have alleged in over 30 lawsuits that the financial institutions misrepresented the securities’ risk and breached associated warranties.
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