Dec. 15 (Bloomberg) — A Credit Suisse Group AG unit was accused in a lawsuit by MBIA Insurance Corp. of making fraudulent misrepresentations about mortgage-backed securities, causing the insurer to pay more than $296 million in claims.
The complaint against Credit Suisse Securities (USA) LLC, filed yesterday in New York State Supreme Court in Manhattan, also names as defendants two other units of the bank, DLJ Mortgage Capital Inc. and Select Portfolio Servicing Inc.
Credit Suisse made “pervasive and material misrepresentations” about a mortgage-backed securities transaction that was sponsored, marketed and serviced by the Credit Suisse units and insured by MBIA, according to the complaint.
The transaction, involving thousands of residential mortgages in a pool later transferred to a trust formed to issue securities that were to be paid down based on the cash flow from the loans, closed in April 2007, said Armonk, New York-based MBIA Insurance, a unit of MBIA Inc.
“CS Securities fraudulently induced MBIA to participate in the transaction,” MBIA said in the complaint. MBIA said the bank claimed it had “used certain strict underwriting guidelines to select the loans sold into the transaction when in fact it did not.”