NATURE OF THE ACTION 1. This action arises out of the fraudulent acts and breaches of contract of Bank of America in connection with five financial guaranty insurance policies issued by CIFG. The policies at issue relate to two structured tran sactions arranged by Bank of America, which in turn were backed by 22 residential mortgage-backed securities (the “Original RMBS, ”backed by the “Mortgage Loans” or “Loans”) Bank of America had these securities in its inventory because it had been unable to sell them when it served as underwriter on the Original RMBS offerings. Bank of America knew of the poor quality of the Mortgage Loans, and knew the unsold Original RMBS were a ticking time bomb on the Bank’s books. Unable to sell the securities piecemeal, the Defendants hatched a new plan of financial engineering: they would fraudulently re-package the securities into new transactions BAFC 2006-R1 (the “R-1 Certificates”) and BAFC 2006-R2 (the “R-2 Certificates”) (collectively, the “Certificates”), re-tranche and re-rate them, and then re-market them to investors via a structure called a Re-REMIC (which stands for Re-securitized Real Estate Mortgage Investment Conduit). 2. To make the Re-REMIC marketable to investors, Defendants induced CIFG to provide over $150 million of financial guaranty insurance. With the credit protection provided by CIFG’s Policies, the Certificates became marketable to investors, and CIFG would bear the risk of loss should the underly ing Original RMBS falter. Read On..... hb.betterregulation/external/CIFG%20Sues%20Bank%20of%20America%20Over%20RMBS%20Insurance%20Policies.pdf
Posted on: Mon, 26 Jan 2015 21:29:19 +0000
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