RMBS Mess: AMBAC Insurer Sues to Rescind Insurance for Deutsch; $900 Million

Ambac Sues Deutsche Bank Over $900M RMBS Trust Losses

Ambac asked a New York federal court Thursday to release it from an obligation to insure some of the $900 million in losses suffered by a residential mortgage-backed securities trust managed by Deutsche Bank National Trust Co., saying the banking giant did not hold the underlying loan issuer accountable.

https://www.pacermonitor.com/public/case/25370385/AMBAC_Assurance_Corporation_v_Deutsche_Bank_National_Trust_Company

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What does Ambac suing Deutsch have to do with me?

Answer: Everything. The entire securitization scheme was built on layers of false information and false premises. Money was sent to the closing agent by conduit parties with no connection to either the investors, the alleged REMIC Trusts, or the so called originators. The originators signed an agreement that made all loans, even before they were actually funded, the property of the second party to the agreement (frequently Countrywide and other aggregators, who also were not lenders).

A false sale was created with fabricated documentation in which the originator, who never owned the loan, sold the loan to the aggregator or another conduit who in turn “sold” it to a REMIC Trust, of which Deutsch was the underwriter of RMBS certificates. Besides the money at the closing table arriving out of left field, no money ever exchanged hands in connection with the so called endorsements or assignments.

Most of the loans were subject to a false buy-back arrangement. The originator, with no assets, agreed to buy back bad loans. And Deutsch was the beneficiary of that agreement (even though it should have been the investors). Based in part upon the empty shell of the buyback from a company that in most cases ceased to exist in the 2008 crash, AMBAC agreed to insure the certificates issued by a falsely identified REMIC Trust.

Now AMBAC says it won’t pay on the insurance because Deutsch failed to put back the bad loans at a time when the originators did exist. In other words if Deutsch had simply gotten the originator or aggregator to buy back the loans there would be nothing to insure. Thus no liability for AMBAC. The defense by Deutsch is going to be that they had no such duty and even if they did it would have been fruitless because the originators had no assets from which they could draw to “repurchase” loans that they never owned or sold.

This case could mean a lot if we can see some of the discovery and transcripts. I assign anyone out there to keep track and investigate this case because this is close we are going to get to showing that none of it was real. The originator never owned the loan, but rather served as a sham conduit for another conduit masquerading as an aggregator for an investment bank masquerading as an underwriter (and Master Servicer) and using the name of a nonexistent fictitiously named trust.

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