(Updates with Ally comment in fifth paragraph.)
Dec. 28 (Bloomberg) -- Ally Financial Inc. was sued by Financial Guaranty Insurance Co. over soured mortgage loans backing securities sold to investors and insured by Financial Guaranty.
Ally’s Residential Funding unit made “material misrepresentations” about the loans, which were riskier than promised, Financial Guaranty said in two lawsuits filed yesterday in New York State Supreme Court in Manhattan.
“The levels of defaults and losses, and therefore the amount of claims presented to FGIC, have been overwhelming,” the company said in court papers.
The lawsuits involve insurance policies issued by Financial Guaranty in connection with about $1.9 billion in mortgage- backed securities, according to court papers. FGIC Corp., the New York-based holding company for Financial Guaranty, filed for bankruptcy in 2010. Financial Guaranty previously sued Ally units in November.
Gina Proia, a spokeswoman for Detroit-based Ally, said in an e-mail that the transactions are those of its ResCap unit, a separate legal entity, and there is “no merit” to Ally being named in the complaint.
“We believe there are substantial legal and factual defenses related to the FGIC claims against ResCap, and we intend to defend that position aggressively,” she said.
The cases are Financial Guaranty Insurance Co. v. Ally Financial Inc., 653621-2011, and Financial Guaranty Insurance Co. v. Ally Financial, 653623-2011, New York State Supreme Court (Manhattan).
--Editors: Stephen Farr, Mary Romano
To contact the reporter on this story: David McLaughlin in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Stephen Farr at email@example.com