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M&T Bank, Goldman Sachs Sued by CIFG

On Tuesday, CIFG Assurance North America, Inc., filed a lawsuit in New York State Supreme Court against Goldman Sachs and M&T Bank, alleging “fraud and breach of contract arising from numerous and systematic misrepresentations and material omissions made by the Defendants in connection with the securitization of a portfolio of approximately 6,204 residential mortgage loans. CIFG is the financial guaranty insurer of approximately $275 million of securities issued in connection with that securitization.”

A majority of the bad loans were made by M&T, then packaged by Goldman Sachs and sold—with CIFG acting as the insurer.

CIFG claims they were duped in 2007—during the buildup to the mortgage crisis—when Goldman Sachs violated its own underwriting guidelines and the warranties they made about the loans, according to the lawsuit.

“Likewise, a review of loans originated by M&T Bank reveals widespread breaches of M&T Bank’s representations and warranties. Consistent with the findings from this sample, the Loans in the asset pool—most of which should never have been made in the first place, let alone sold and packaged into a securitization—have been defaulting at staggering rates, with delinquencies beginning prior to closing of the Securitization and increasing rapidly thereafter,” the suit contends.

CIFG is seeking compensation for the hundreds of millions of dollars it may be liable for due to being misled by the defendants in 2007. The plaintiffs want Goldman Sachs and M&T to repurchase all the breaching loans, award of damages, court costs, etc., and further relief as the Court deems just and proper.

Meanwhile, CIFG is not handling any new business. A spokesperson there said, “We insure securities that were backed by mortgage loans. Goldman Sachs and M&T and others made representations about the loans which we believe are false, and so there are contractual remedies they’re supposed to follow which they did not. So we’re forced to litigate to pursue our claims.”

M&T has not responded to our request for comment.

Click here to download a copy of the lawsuit.

(And, yes, I know what you’re thinking: “Why am I reading about this in Artvoice, and not in The Buffalo News or Business First?”)

  • Peter A Reese

    Bob Wilmers was quoted from his chateau in France that this suit is “a travesty of a mockery of a sham of a mockery of a travesty of two mockeries of a sham.”