Bond-insurer Assured Guaranty Corp. has sued JPMorgan over MBS that Assured says JPMorgan misrepresented.

It is suing JPMorgan because of the actions Bear Stearns took in the last decade. JPMorgan took over the remnants of Bear Stearns during  the financial crisis.

Specifically, Assured Guaranty is alleging Bear Stearns committed fraud with regards to the mortgage-backed securities known as SACO I Trust 2005-GP1. The transaction was executed in September 2005.

Assured Guaranty claims that Bear Stearns retained underwriters to review mortgages for the securities who among themselves used the phrase, “Bear don’t care.” Bear Stearns pressured the underwriters to approve large numbers of mortgages to people whose ability to repay were unknown or questionable, Assured Guaranty states.

Among other things, the suit asks for compensatory and punitive damages to be assessed against JPMorgan.

This is the third active suit by Assured Guaranty against JPMorgan in the Manhattan branch of the Supreme Court of New York.

In 2008, Assured Guaranty sued JPMorgan Investment Management concerning Assured’s guarantee of notes supporting a reinsurance transaction involving a captive special-purpose vehicle named Orkney Re II p.l.c. JPMorgan was the investment manager of Orkney. According to Assured, JPMorgan was “reckless” by putting the assets in “undiversified, highly risky subprime mortgage-backed securities.”


JPMorgan declined to comment for this story.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.