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http://www.reuters.com/article/2011/...77G0JK20110817
By Ben Berkowitz and Jonathan Stempel
By Ben Berkowitz and Jonathan Stempel
NEW YORK, Aug 17 (Reuters) - Bond insurer CIFG Assurance North America has sued Goldman Sachs Group and M&T Bank Corp in New York state court, claiming they fraudulently convinced CIFG to insure $275 million in mortgage-backed securities.
CIFG is the latest bond insurer to sue Goldman over mortgage-backed securities that went bad, and the latest to make a similar claim -- that Goldman knowingly sold shaky mortgage bonds to get the risk off its books. ACA Financial Guaranty sued Goldman in January for similar reasons.
The suit, filed Tuesday, relates to securities from a portfolio of 6,204 loans, most of which CIFG said were made by M&T. Goldman subsequently packaged them and sold the GSAA Home Equity Trust 2007-S1 in February 2007; CIFG insured the Class A-1 certificates from the securitization.
CIFG said in the suit that it has reviewed a sample of loans from the portfolio that are in default and that most of them violate Goldman's own guidelines and M&T's representations and warranties on the loans.
"Consistent with the findings from this sample, the loans in the asset pool -- most of which should never have been made in the first place, let alone sold and packaged into a securitization -- have been defaulting at staggering rates, with delinquencies beginning prior to closing of the securitization and increasing rapidly thereafter," the suit said.
CIFG asked the court to order Goldman and M&T to compensate it for claims it may have to pay out in the hundreds of millions of dollars, as well as to buy back the nonperforming loans from the portfolio.
Goldman Sachs declined to comment. An M&T spokesman was not immediately available to comment. CIFG is currently in run-off, managing existing policies but not writing any new business. It is in the process of transferring much of its public finance portfolio to Assured Guaranty.
The suit is CIFG Assurance North America Inc. vs. Goldman, Sachs & Co. et. al, Supreme Court of the State of New York, No. 652286/2011.
The case documents should be posted here http://iapps.courts.state.ny.us/iscroll/index.jsp
CIFG is the latest bond insurer to sue Goldman over mortgage-backed securities that went bad, and the latest to make a similar claim -- that Goldman knowingly sold shaky mortgage bonds to get the risk off its books. ACA Financial Guaranty sued Goldman in January for similar reasons.
The suit, filed Tuesday, relates to securities from a portfolio of 6,204 loans, most of which CIFG said were made by M&T. Goldman subsequently packaged them and sold the GSAA Home Equity Trust 2007-S1 in February 2007; CIFG insured the Class A-1 certificates from the securitization.
CIFG said in the suit that it has reviewed a sample of loans from the portfolio that are in default and that most of them violate Goldman's own guidelines and M&T's representations and warranties on the loans.
"Consistent with the findings from this sample, the loans in the asset pool -- most of which should never have been made in the first place, let alone sold and packaged into a securitization -- have been defaulting at staggering rates, with delinquencies beginning prior to closing of the securitization and increasing rapidly thereafter," the suit said.
CIFG asked the court to order Goldman and M&T to compensate it for claims it may have to pay out in the hundreds of millions of dollars, as well as to buy back the nonperforming loans from the portfolio.
Goldman Sachs declined to comment. An M&T spokesman was not immediately available to comment. CIFG is currently in run-off, managing existing policies but not writing any new business. It is in the process of transferring much of its public finance portfolio to Assured Guaranty.
The suit is CIFG Assurance North America Inc. vs. Goldman, Sachs & Co. et. al, Supreme Court of the State of New York, No. 652286/2011.
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