Financial Guaranty Insurance Co. (FGIC) has filed a new lawsuit – its fifth in two months – against government-owned Ally Financial Inc. over $2.8 billion in failed mortgage-backed securities (MBS) transactions.
According to media reports, FGIC claims that Ally Financial made ‘material misrepresentations’ about the quality of the loans used in the securities, which were sold to investors and insured by FGIC. ‘The levels of defaults and losses, and therefore the amount of claims presented to FGIC, have been overwhelming,’ FGIC said in papers filed in the New York State Supreme Court, adding that the loans were ‘different – and demonstrably worse – than [Ally] represented them to be.’
FGIC is also suing several Ally Financial subsidiaries, including Residential Capital LLC. This is the second wave of lawsuits that FGIC has filed against Ally Financial – the company initiated three lawsuits relating to $3.8 billion in MBS transactions last month and a fourth lawsuit on a $380 million deal two weeks ago.