NEW YORK (Reuters) - A New York judge has narrowed a lawsuit by bond insurer Assured Guaranty Ltd against JPMorgan Chase & Co over alleged misrepresentations involving $337 million in mortgage-backed securities sold by Bear Stearns.
The lawsuit, filed in New York state court last year, alleged that Bear Stearns and its EMC Mortgage arm knew the pool of more than 6,000 home-equity lines of credit that served as collateral for the 2005 transaction was plagued by defective loans. JPMorgan bought Bear after it collapsed in 2008 in a government-brokered deal.
The ruling Tuesday by Manhattan Supreme Court Justice Charles Ramos limited Assured's breach of contract claims against JPMorgan to compelling the bank to repurchase defective loans that didn't follow underwriting guidelines.
Assured, backed by billionaire investor Wilbur Ross, is among several insurers, including Ambac Financial Group Inc and MBIA Inc, that claim banks misled them into insuring mortgage-backed securities before the housing market meltdown by concealing significant risk in the underlying loans.
Assured recently won a $106.5 million judgment against Flagstar Bancorp Inc in the first such case to go to trial.
Representatives for Assured and JPMorgan did not immediately comment on Tuesday's ruling.
JPMorgan had also moved to dismiss a fraud claim brought by Assured, but both sides agreed to hold off pending a state appeals court decision in another case pitting CIFG Assurance North America against Goldman Sachs Group Inc that resulted in the dismissal of a similar claim.
Assured said in the lawsuit that it had paid out more than $43 million in claims as of 2011 after the transaction suffered losses exceeding $75 million.
The case is Assured Guaranty v. EMC Mortgage, New York State Supreme Court, New York County, No. 650805/12.
Reporting by Joseph Ax; editing by Andrew Hay