Judge rules Assured Guaranty can move forward with UBS suit

Thu Aug 16, 2012 12:18pm EDT
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NEW YORK (Reuters) - Assured Guaranty Ltd (AGO.N: Quote) can move forward with part of a lawsuit accusing UBS AG UBSN.VX 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 (MBI.N: Quote) 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 (JPM.N: Quote), Credit Suisse CSGN.VX and Flagstar Bancorp Inc (FBC.N: Quote). It reached settlements with Bank of America (BAC.N: Quote) for $1.1 billion and Deutsche Bank (DBKGn.DE: Quote) 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.   Continued...