NEW YORK – Credit Suisse Group AG settled a lawsuit brought by bond insurer Ambac Financial Group Inc over misrepresentations on mortgage-backed securities that Ambac insured in 2007, according to court documents and a source familiar with the matter.
The terms of the settlement were not made public.
Ambac's lawsuit claimed Credit Suisse Securities, along with its affiliate DLJ Mortgage Capital, misled the insurer about a pool of over 2,000 home equity lines of credit with a principal balance of about $170 million. Ambac said the defendants did not disclose that many borrowers had little or no ability to repay.
When Ambac filed its lawsuit in 2010, Ambac said it already had made claim payments of over $44 million and expected to pay tens of millions more.
A stipulation discontinuing the action was filed in New York state court on Friday. The source familiar with the matter said the filing meant the parties had settled.
John Ansbro, a lawyer for Zurich-based Credit Suisse, Switzerland's second-largest bank, declined comment. An Ambac representative did not immediately return a call for comment.
Ambac filed for Chapter 11 in 2010 and had a restructuring plan approved by a bankruptcy judge last March. The company and other bond insurers have sued banks who packaged and sold mortgage securities after struggling with large losses.
The lawsuit is similar to those filed by other bond guarantors including MBIA Inc and Assured Guaranty Ltd against such banks as JPMorgan Chase and Co and Bank of America Corp .
Credit Suisse recently has become a target of government probes over mortgage-backed securities. The bank is under investigation by the U.S. Attorney's office in New Jersey over mortgage-backed securities packaged and sold by the bank, as Reuters reported last week.
New York Attorney General Eric Schneiderman filed a case against Credit Suisse in November, accusing the bank of misleading investors who lost billions in mortgage-backed securities sold by the bank.
The same month, the bank agreed to a $120 million settlement with the U.S. Securities and Exchange Commission over the sale of risky mortgage bonds.
The case is Ambac Assurance Corp v DLJ Mortgage Capital, 600070/2010, New York State Supreme Court, New York County.
(Additional reporting by Jessica Dye and Nick Brown; Editing by Bob Burgdorfer)