(May 8, 2013) — A monoline insurer has been granted the right to pursue a fraud case against Goldman Sachs over mortgage-backed securities (MBS) it was asked to cover before the financial crisis.
CIFG Assurance North America was told yesterday by the New York State Supreme Court’s Appellate Division that it could appeal a verdict on a case it brought against the investment bank in 2011, Reuters reported.
The insurer claims Goldman Sachs fraudulently convinced it to provide insurance for a portfolio of more than 6,000 subprime residential mortgages by concealing their poor quality.
Last year, the case was thrown out of a court in Manhattan, as the judge claimed the insurer should have carried out more extensive due diligence on the MBS before taking on the portfolio.
Yesterday, a panel of judges agreed that hiring a third party to analyse the loans – as the insurer claimed to have done – was sufficient due diligence and allowed the case to proceed.
A spokesman for Goldman Sachs declined to comment.
Over the last six months, Goldman Sachs, along with several other “bulge-bracket” banks have fought and settled with pension funds over their sale of MBS before the financial crisis.
Dutch pension ABP alone netted several tens of millions by settling cases out of court with Goldman Sachs, JP Morgan, and Deutsche Bank.