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MBIA VS. CREDIT SUISSE

MBIA VS. CREDIT SUISSE

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Published by Foreclosure Fraud
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Categories:Types, Research
Published by: Foreclosure Fraud on Feb 03, 2013
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07/10/2013

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5909119v.1
PATTERSON BELKNAP WEBB & TYLER LLPErik Haas (ehaas@pbwt.com)Nicolas Commandeur (ncommandeur@pbwt.com)David Slarskey (dnslarskey@pbwt.com)1133 Avenue of the AmericasNew York, NY 10036-6710Telephone: (212) 336-2000Fax: (212) 336-2222Attorneys for plaintiff MBIA Insurance CorporationSUPREME COURT OF THE STATE OF NEW YORKCOUNTY OF NEW YORK---------------------------------------------------------------xMBIA INSURANCE CORPORATION, : Index No. 603751/09: (Kornreich, J.):Plaintiff, ::- against - :
FIRST AMENDED
:
VERIFIED COMPLAINT
CREDIT SUISSE SECURITIES (USA) LLC, :DLJ MORTGAGE CAPITAL, INC., and :SELECT PORTFOLIO SERVICING, INC., ::Defendants. :---------------------------------------------------------------x
FILED: NEW YORK COUNTY CLERK 01/30/2013
INDEX NO. 603751/2009NYSCEF DOC. NO. 391RECEIVED NYSCEF: 01/30/2013
 
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NATURE OF ACTION...................................................................................................................4THE PARTIES...............................................................................................................................16JURISDICTION AND VENUE....................................................................................................16FACTUAL ALLEGATIONS ........................................................................................................17I. CREDIT SUISSE’S SECURITIZATION PROGRAM.....................................................17A. Credit Suisse Built Its RMBS Mortgage-Loan Conduit........................................18B. Credit Suisse Financed Originators .......................................................................19C. Credit Suisse Acquired Discredited Servicer Operations......................................22D. Credit Suisse Profited Significantly From RMBS Securitizations........................22II. CREDIT SUISSE FRAUDULENTLY INDUCED MBIATO ISSUE THE POLICY..................................................................................................24A. Credit Suisse Solicited the Policy, and MBIA Made ReasonableDue Diligence Inquiries of Credit Suisse Before EnteringInto the Transaction ...............................................................................................24B. Credit Suisse Responded to MBIA’s Due Diligence InquiriesWith False and Misleading Representations About Its RMBSBusiness Practices..................................................................................................251. Credit Suisse Misrepresented its Seller Approval andMonitoring Practices..................................................................................262. Credit Suisse Misrepresented its Own Underwriting Practices.................323. Credit Suisse Misrepresented Its Loan Due Diligence Practices...............364. Credit Suisse Misrepresented its Quality Control Practices......................445. Credit Suisse Misrepresented Its Repurchase Practices.............................506. Credit Suisse Misrepresented the Performance of the HEMT Shelf .........58C. Credit Suisse Misrepresented the Quality and Attributes of the Loans.................601. Credit Suisse Supplied MBIA With False and MisleadingLoan Tapes.................................................................................................60
 
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2. Credit Suisse Supplied MBIA With False and MisleadingDue Diligence Results................................................................................623. Credit Suisse Obtained False and Misleading Ratings..............................63D. Credit Suisse Issued False and Misleading Investor Disclosures..........................65III. MBIA AGREED TO ISSUE THE POLICY BASED UPON THEREPRESENTED AND WARRANTED INFORMATION SUPPLIEDBY CREDIT SUISSE........................................................................................................69A. The Parties Agreed to An Allocation of Risks.......................................................69B. MBIA Reasonably Relied Upon Credit Suisse’s MisrepresentationsWhen It Evaluated the Risk of Issuing the Policy.................................................71IV. CREDIT SUISSE WARRANTED THE TRUTH OF THE INFORMATIONPROVIDED TO MBIA AND THE ATTRIBUTES OF THE LOANS ............................74A. The Transaction Level Warranties.........................................................................75B. Loan-Level Warranties ..........................................................................................77C. Credit Suisse Agreed to Provide Notice to MBIA of Known BreachingLoans, and to Cure or Repurchase Them From the Trust......................................79D. Credit Suisse’s Servicing Obligations ...................................................................80V. MBIA DISCOVERS PERVASIVE BREACHES OF LOAN WARRANTIES ...............86VI. CREDIT SUISSE FRUSTRATED THE REPURCHASE PROTOCOLBY REFUSING TO REPURCHASE ANY OF THE DEFECTIVE LOANS ..................88VII. CREDIT SUISSE’S POST-LITIGATION RESPONSES TO MBIAEVIDENCE ITS MERITLESS DENIALS OF MBIA’S REPURCHASEDEMANDS........................................................................................................................90FIRST CAUSE OF ACTION:(FRAUDULENT INDUCEMENT AGAINST CS SECURITIES)...................................91SECOND CAUSE OF ACTION:(MATERIAL BREACH OF THE INSURANCEAGREEMENT AGAINST DLJ).......................................................................................92THIRD CAUSE OF ACTION:(BREACH OF THE REPURCHASE PROTOCOL AGAINST DLJ)..............................93

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