Assured Sues UBS for Contract Breach in RMBS Deals


Assured Guaranty has filed a lawsuit against UBS’ real estate securities unit over breach of contract claims.

The lawsuit, which was filed last week in the New York Supreme Court in Manhattan, said that the UBS real estate unit failed to abide by its contractual obligation under the pooling and servicing agreements related to three RMBS issued over 2006 and 2007.

UBS Real Estate sought a financial guaranty insurer to guarantee the trusts’ payments to investors on certain classes of the senior certificates if payments on the underlying mortgage loans became insufficient.

Assured said that its agreement to provide this insurance was based on a comprehensive set of representations and warranties in the PSAs governing these transactions.

“UBS Real Estate assembled these securitizations from thousands of residential mortgage loans and, as an inducement to investors and insurers, represented, among other things, that those mortgage loans met specified quality control standards and were underwritten according to applicable guidelines,” the bond insurer said in its filing. “UBS Real Estate’s representations were false, and, as a result, Assured has sustained and will continue to sustain substantial damages.”

As of December 15, 2011, Assured has reviewed 2,945 delinquent and liquidated mortgage loans with an aggregate original principal balance of $1,173,390,439. 

In its complaint, the plaintiff stated that at least 90% of the $67,749,565 original principal balance of mortgage loans in the 2006-OA2 transaction breached one or more mortgage representations.

Of the $832,029,261 original principal balance of mortgage loans in the 2007-1 transaction, at least 81% had breached one or more mortgage representations and for the $273,611,613 original principal balance of mortgage loans in the 2007-3 transaction, at least 95% had breached one or more mortgage representations. 

Assured filed a brief in the New York state Supreme Court earlier this year against a motion to dismiss stemming from its case against Credit Suisse Group.

In October last year, the financial guarantor sued DLJ Mortgage Capital, a Credit Suisse Group unit, over $1.8 billion of MBS it insured also on similar grounds as its latest claim.

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