Insurer Says Ally Financial Cloaked $693M MBS Risk

Law360, New York (March 9, 2012, 1:16 PM EST) -- Financial Guaranty Insurance Co. lodged a suit against Ally Financial Inc. and two subsidiaries last week, accusing the companies of fraudulently inducing the insurer into backing $693 million worth of residential mortgage-backed securities by misrepresenting the credit quality of the loans.

Ally subsidiary Residential Funding Company LLC made “material misrepresentations and warranties” to FGIC about the characteristics of the mortgage loans and the way in which they were selected and evaluated in order to trick the insurer into issuing a policy for them, according to the...
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