NEW YORK Aug 16 Assured Guaranty Ltd
can move forward with part of a lawsuit accusing UBS AG
of falsely representating the quality of the loans
underlying $1.49 billion of mortgage-backed securities it
insured, a federal judge has ruled.
The lawsuit is one of several filed since the financial
crisis hit monoline insurers over losses they sustained insuring
mortgage-backed securities when the housing market tumbled.
Other monolines with similar lawsuits against banks include MBIA
Inc and Ambac Financial Group Inc.
U.S. District Court Judge Harold Baer, in Manhattan, on
Wednesday kept Assured's claims alive, though he dismissed a
portion of the case.
Baer allowed Assured to press ahead with claims that UBS
breached contracts underlying the securities by misleading the
insurer about the quality of the mortgages.
He dismissed a claim that accused UBS of breaching
obligations to repurchase defective mortgage loans. Baer said
only the trustee for the trusts underlying the mortgage-backed
securities could make such a demand.
Assured Guaranty has demanded UBS buy back $1.6 billion in
loans, the bank said in an April court filing.
A spokeswoman for Assured had no immediate comment Thursday.
UBS declined to comment through a spokesman.
Assured has similar lawsuits pending against units of
JPMorgan Chase & Co, Credit Suisse and
Flagstar Bancorp Inc. It reached settlements with Bank
of America for $1.1 billion and Deutsche Bank
for $165.6 million, without filing lawsuits against them.
Assured sued UBS in February after the bank declined to
repurchase hundreds of millions of dollars worth of mortgages.
The lawsuit, which claimed breach of contract, focused on
financial guaranty insurance Assured provided in 2006 and 2007
to three mortgage-backed securities transactions.
The policies, as was common at the time, provided that
Assured would cover losses if cash flows from the mortgages were
not enough to pay investors what they were owed.
In his ruling, Baer also said Assured could sue UBS for
allegedly breaching another set of agreements by providing
"false and misleading data" to Standard & Poor's and Moody's in
an effort to procure inflated credit ratings for the securities.
Assured had made any insurance conditional on the securities
being rated AAA or slightly below.
Assured's stock was up 3.3 percent to $13.85 near midday on
the New York Stock Exchange.
The case is Assured Guaranty Municipal Corp. V. UBS Real
Estate Securities, Inc., U.S. District Court for the Southern
District of New York, 12-cv-01579