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CIFG Sues Greenpoint Over $277 Million in Mortgage Loans

businessweek.comOct 2, 2012

By Chris Dolmetsch

CIFG Assurance North America Inc. sued GreenPoint Mortgage Funding Inc., claiming the shuttered company provided false information and made material omissions about loans it originated.

CIFG accuses GreenPoint of fraud and breach of contract over a February 2007 transaction that resulted in the sale of $277 million in mortgage pass-through certificates, one class of which was insured by CIFG, according to a filing yesterday in New York State Supreme Court in Manhattan.

GreenPoint originated about $58 million in residential mortgage loans in connection with the securitization that were sold to a trust under an agreement with a Goldman Sachs Group Inc. unit, according to a court filing.

“GreenPoint provided false information, and made material omissions, about, among other things, the quality and characteristics of the loans that it originated and sold to be securitized,” CIFG said in the court filing. CIFG seeks unspecified damages and a declaration that GreenPoint is obligated to repurchase defective loans sold to the trust.

Capital One Financial Corp. (COF) shut Novato, California-based GreenPoint in August 2007, less than a year after acquiring its parent company, Long Island’s North Fork Bancorp.

Julie Rakes, a spokeswoman for McLean, Virginia-based Capital One, didn’t immediately reply to telephone and e-mail messages seeking comment on the lawsuit.

Motion Denied

CIFG originally sued GreenPoint in New York State Supreme Court in Manhattan in 2009, accusing the company of violating its mortgage-underwriting guidelines. Justice Bernard Fried threw out that lawsuit in 2010. In February, Fried denied a motion by CIFG and fellow bond insurer Syncora Guarantee Inc. to bring new claims against GreenPoint in a lawsuit over the quality of $1.8 billion of home loans they guaranteed.

CIFG in April asked a judge to let it add GreenPoint to a lawsuit it filed against Goldman Sachs in August 2011, accusing the New York-based investment bank of making misrepresentations in connection with $275 million in mortgage-backed securities.

Goldman Sachs last year asked the court to throw out the lawsuit, saying CIFG was informed of the risks associated with the investments, failed to conduct its own due diligence and hadn’t sought “clear contractual remedies” that would allow it to seek the repurchase of specific loans.

Counts Dismissed

Justice O. Peter Sherwood in May granted Goldman Sachs’s motion to dismiss three counts in the suit, including one for fraudulent inducement. He refused to dismiss three other claims for breach of contract.

CIFG and Goldman Sachs have both appealed the decision. Sherwood in July ordered the two sides to engage in mediation, which is scheduled for Oct. 26, according to a Sept. 13 court filing.

The case is CIFG Assurance North America Inc. v GreenPoint Mortgage Funding Inc., 653449/2012, New York State Supreme Court, New York County (Manhattan).

Back to October 2012 Archive

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