Court Rules Flagstar Bank Must Pay $90.1M To Assured Over Loans Underlying MBS

Flagstar Bank FSB must pay $90.1 million to Assured Guaranty Municipal Corp. for claims the insurer paid to investors in two mortgage-backed securities trusts backed by loans underwritten by the bank, some of which ultimately proved defective, the U.S. District Court for the Southern District of New York ruled Feb. 6 (Assured Guaranty Municipal Corp. v. Flagstar Bank FSB, S.D.N.Y., 11-02375).

In a 103-page opinion, Judge Jed Rakoff concluded that Flagstar materially breached its agreement with Assured by failing to “cure the defects” or repurchase the problematic loans from the trusts. The decision, Rakoff said, ultimately came down ...