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For the last two years, MBIA Insurance Corp. and J.P. Morgan Securities have been fighting in court. In September 2012, MBIA sued JPMorgan (and Bear Stearns, which was acquired by JP Morgan in 2008), alleging that Bear Stearns altered a third-party due diligence report so that MBIA would insure a $1.16 billion mortgage securitization.
The securitization in question, 2006-HE4 Securitization, originated from a pool of risky mortgages and MBIA alleged that Bear Stearns, as lead underwriter, manipulated the deal’s due diligence report to make the securitization look safer than it actually was.
And according to New York State Supreme Court Justice Alan Scheinkman, that’s exactly what Bear Stearns did. But Scheinkman dismissed the case anyway because MBIA could not prove that it used the fraudulent information in its decision to insure the securitization.
