Bloomberg News

JPMorgan Sued by Assured Guaranty Over Mortgage Securities

March 15, 2012

Assured Guaranty Corp. (AGO) sued JPMorgan Chase & Co.’s EMC Mortgage and Bear Stearns units in New York state court, accusing them of making misrepresentations to market mortgage-backed securities.

The lawsuit was brought in connection with a mortgage- backed securities transaction known as SACO I Trust 2005-GPI, sold in September 2005, which has experienced cumulative losses of more than $75 million, resulting in more than $43 million in claims to be paid by the plaintiff, a New York-based unit of Hamilton, Bermuda-based insurer Assured Guaranty Ltd.

“The transaction that Bear Stearns marketed and effectuated based on its materially false and misleading representations and disclosures has failed miserably,” Assured Guaranty said in its complaint. “An overwhelming percentage of the loans that Bear Stearns securitized in the transaction either have been written off as total losses or are severely delinquent.”

EMC Mortgage was a unit of Bear Stearns Cos. until the investment bank was bought by JPMorgan (JPM) in 2008.

Pools of home loans securitized into bonds were a central part of the housing bubble that helped send the U.S. into the biggest recession since the 1930s. The housing market collapsed, and the crisis swept up lenders and investment banks as the market for the securities evaporated.

Jennifer Zuccarelli, a spokeswoman for New York-based JPMorgan, didn’t immediately return a phone message seeking comment on the lawsuit.

The case is Assured Guaranty Corp. v. EMC Mortgage LLC, 650805/2012, New York State Supreme Court (Manhattan.)

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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