Rakoff delivers enormous gift to MBS bond insurers, noteholders

``Rakoff is the third judge to offer an analysis of loss causation in the context of a bond insurer's put-back case -- and the third to reject MBS issuers' arguments that they're only liable for repurchasing deficient underlying mortgages when the breaches caused the loans to default. Like his Manhattan federal court colleague Paul Crotty, who granted summary judgment to the bond insurer Syncora in its case against EMC in June, Rakoff said that Assured must only show that the breaches in representations and warranties materially increased the risk that the insurer would suffer losses. (New York State Supreme Court Justice Eileen Branstenreached the same destination via a different route in January in MBIA's put-back case against Countrywide.) "Put another way," Rakoff wrote, "the causation that must here be shown is that the alleged breaches caused plaintiff to incur an increased risk of loss."''