Syncora RMBS Suit Against JPMorgan Dismissed

A New York state appeals court in Manhattan Tuesday reversed an earlier ruling and dismissed Syncora Guarantee Inc.'s lawsuit accusing JPMorgan Chase & Co. of defrauding the bond insurer by misrepresenting a structured finance transaction.

Syncora sued JPMorgan in 2011 over the transaction, a residential mortgage backed security for which Bear, Stearns & Co., now a unit of JPMorgan, served as manager and underwriter. The deal, known as GreenPoint Mortgage Funding Trust 2007-HEI, quickly went south when underlying mortgage loans defaulted and Syncora was forced to pay claims under its insurance policy.

According to Syncora, the underwriter and sponsor misrepresented the borrowers' ability to pay and failed to adhere to certain underwriting guidelines when originating the loans. The insurer has said it has paid out more than $320 million in unreimbursed insurance claims.

New York County Supreme Court Justice Charles Ramos in May 2012 denied a motion for dismissal by JPMorgan that claimed Syncora attempted litigation in a district court. Today's decision by Justice Karla Moskowitz reversed that ruling.

"Here, both actions arise out of the same transaction, involve the same allegations concerning Bear Stearns's and EMC's concerted actions in the 'mortgage-loan-securitization chain' and seek the same recovery for the same alleged injuries - that is, recovery of 'claims payments made and to be made' under the policy," Moskowitz wrote, according to court documents.

Representatives from JPMorgan and Syncora chose not to comment for this story.

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