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AMBAC Assur. Corp. v. EMC Mortg. LLC

Supreme Court of New York, New York County

June 13, 2013

AMBAC ASSURANCE CORPORATION and the Segregated Account of Ambac Assurance Corporation, Plaintiff,
v.
EMC MORTGAGE LLC (formerly known as EMC Mortgage Corporation), J.P. Morgan Securities LLC (formerly known as Bear, Stearns & Co. Inc.), and JPMorgan Chase Bank, N.A., Defendants. No. 651013/12.

Editorial Note:

This decision has been referenced in a table in the New York Supplement.

Nicolas Commandeur, Esq., of Patterson Belknap Webb & Tyler LLP, for plaintiffs.

Sharon Nelles, Esq., of Sullivan Cromwell LLP, for defendants.

CHARLES E. RAMOS, J.

Motion sequence numbers 02 and 03 are consolidated for disposition.

In motion sequence 02, defendants EMC Mortgage, LLC (EMC), J.P. Morgan Securities LLC and JPMorgan Chase Bank, N.A. (together, JP Morgan) move to dismiss the first amended complaint pursuant to CPLR 3211(a)(1) and (7).

In motion sequence 03, defendants move by order to show cause to enjoin plaintiffs Ambac Assurance Corporation and the Segregated Account of Ambac Assurance Corporation (Segregated Account) (together with Ambac Assurance Corporation, Ambac) from taking any action in other jurisdictions that would interfere with this Court's jurisdiction to adjudicate the contract claims Ambac has brought in this action.

Background

The facts set forth herein are taken from the pleadings and are assumed to be true for the purposes of disposition.

This is the second lawsuit that Ambac, a monoline insurer, has filed in this Court relating to its issuance of financial guaranty insurance for residential mortgage-backed securities transactions (RMBS) after inquiry and investigation has purportedly revealed rampant fraud on the part of Bear Stearns and its affiliate, EMC.

The Transactions

This action involves seven RMBS transactions executed between March 2006 and November 2006: Greenpoint Mortgage Funding Trust 2006-AR2 (GPMF 2006-AR2), Greenpoint Mortgage Funding Trust 2006-AR3 (GPMF 2006-AR3), Structured Asset Mortgage Investments II Trust 2006-AR7 (SAMI 2006-AR7), Bear Stearns Mortgage Funding Trust 2006-AR2 (BSMF 2006-AR2), Bear Stearns Alt-A Trust 2006-R1 (BALTA 2006-R1), Structured Asset Mortgage Investments Trust 2006-AR8 (SAMI 2006-AR8), and Bear Stearns Mortgage Funding Trust 2006-AR4 (BSMF 2006-AR4) (together, the transactions).

Greenpoint originated all of the loans in the 2006-AR2 and GPMF 2006-AR3 transactions. Countrywide originated all of the loans in the SAMI 2006-AR7 transaction, and was a significant originator of loans (52%) in the SAMI 2006-AR8 transaction.

The three remaining transactions are populated with loans originated in part by EMC affiliate, Bear Stearns Residential Mortgage Corporation (BSRMC). BSRMC originated 91% of the loans in the BSMF 2006-AR2 transaction, and approximately 52% of the loans in the 2006-AR4 transaction.

The Agreements

The transactions were effectuated through a series of inter-locking agreements executed by EMC and its affiliates that governed the rights and obligations of the various parties with respect to the RMBS. EMC purchased the underlying mortgage loans from the third party originators and then sold and assigned its entire interest in the loans to a " depositor," which then sold the mortgage loans into securitization trusts, pursuant to Mortgage Loan Purchase Agreements (MLPA).

Under section 7 the MLPAs, EMC made numerous representations and warranties pertaining to the underlying mortgage loans as of the closing date of the transactions. In section 8 of the MLPAs, EMC also represented that sections of the Prospectus Supplements (ProSupps) describing the mortgage loans did not include any untrue statement of a material fact.

The Pooling and Servicing Agreements (PSA) govern the sale of the interest in the mortgage loans from the depositor to the securitization trust. The trusts issued various classes of mortgage-backed securities, which were registered with the SEC and underwritten and marketed to investors by Bear ...


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