Bankrupt Insurer Sues RFC, GMAC Over RMBS Deals

Financial Guaranty Insurance Co. – a wholly owned subsidiary of FGIC Corp., the insurer that entered Chapter 11 bankruptcy protection in August 2010 – has filed complaints in the New York Supreme Court against Residential Funding Co. LLC (RFC), GMAC Mortgage LLC and certain of their respective affiliates.

Claiming representation and warranty breaches, the lawsuits are tied to four FGIC-insured residential mortgage-backed securities (RMBS) transactions that came to market in 2005 and 2006.

In one of the complaints, FGIC targets two RFC-sponsored deals, alleging RFC misrepresented the mortgage loan underwriting and the credit quality of loans that served as collateral for the RMBS transactions.

Another lawsuit claims GMAC "fraudulently induced FGIC's agreement" to insure an RMBS deal "through willful and material misrepresentations and omissions concerning the nature of its business practices and the credit quality of the tens of thousands of mortgage loans."

In a statement, FGIC said that it anticipates filing additional complaints in connection with other FGIC-insured RMBS transactions sponsored by RFC or GMACM.

http://www.fgic.com/aboutfgic/legalproceedings/ramp-rs-initial-20111129.pdf
http://www.fgic.com/aboutfgic/legalproceedings/gmacm-he1-initial-20111129.pdf

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