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MBIA fraud claim against Credit Suisse dismissed

A giant watch displays the time in front of the logo of Swiss Credit Suisse bank at the Bahnhofstrasse in Zurich
A giant watch displays the time in front of the logo of Swiss Credit Suisse bank at the Bahnhofstrasse in Zurich

SAN FRANCISCO (Reuters) - A New York judge dismissed part of a lawsuit brought by bond insurer MBIA against Credit Suisse , and rejected MBIA's request for punitive damages in the case.

Credit Suisse and two other defendants securitized approximately 15,000 second-lien residential mortgages in 2007, according to court documents. The companies solicited MBIA to insure the interest and principal relating to certain classes of certificates.

In the 2009 lawsuit, MBIA said that since the transaction closed in April 2007, loans accounting for more than half of the original total loan balance had defaulted, requiring it to make about $296 million in claim payments.

MBIA accuses the banking giant of misrepresenting the quality of mortgage backed securities. It has filed similar lawsuits against several other financial institutions.

In a ruling on Wednesday, New York State Supreme Court Justice Shirley Werner Kornreich dismissed a fraud claim against Credit Suisse and turned aside MBIA's attempts to secure punitive damages. Kornreich had previously allowed that claim to proceed.

MBIA spokesman Kevin Brown said the company intends to appeal.

Kornreich also dismissed parts of some separate claims brought by MBIA, while allowing others to proceed.

The case in the Supreme Court of the State of New York, New York County is MBIA Insurance Corporation v. Credit Suisse Securities (USA) LLC et al, 603751/2009.

(Reporting by Dan Levine; editing by Carol Bishopric)

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