Syncora Guarantee Inc. v. EMC Mortgage Corp., 874 F. Supp. 2d 328

EMC purchased 9,871 HELOCs and securitized them into mortgage-backed notes; Syncora insured the securitization.
Syncora, as third-party beneficiary under the I & I and other Operative Documents, alleges EMC breached warranties and warranties, and seeks indemnification and policy-related relief.
MLPA § 7 provides a repurchase remedy (cure, repurchase, or substitute) upon a breach that adversely affects the interests of the Purchaser, Note Insurer, or related parties.
Syncora moved for partial summary judgment contending a pool-wide repurchase remedy applies without proving individual loan defaults; the court previously granted partial judgment on related issues.
The I & I conditions closing by requiring truth of EMC’s warranties on the Closing Date; the disputes focus on whether breaches must cause defaults to trigger repurchase and whether increased risk alone suffices for breach.
The court addresses whether equitable rescission-equivalent relief is available, and concludes the record is insufficient to grant such relief at this stage.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does the repurchase provision require causal default evidence?	Syncora: breaches; no need to show defaults; increases insurer's risk suffices.	EMC: must show breach caused a loan default or adverse physical harm; ambiguity in text.	No causation required; adverse effect on Note Insurer suffices.
May Syncora prove a material breach of the I & I by increased risk at closing?	Syneora may rely on § 3106(b) to show breach increases risk of loss, even without defaults.	Section 3106(b) does not apply or is inapplicable to third-party beneficiary here.	Yes; Syncora may establish material breach by showing increased risk of loss.
Is equitable relief equivalent to rescission available despite the Policy's irrevocability?	Court can fashion rescission-equivalent relief if warranted by law.	Rescission is extraordinary and not justified without complete record of grounds.	Denied; no ruling on equitable relief at this stage.

Paneccasio v. Uni-source Worldwide, 532 F.3d 101 (2d Cir. 2008) (causation not required for breach-related liability in contract context)
Cantor Fitzgerald Assocs., L.P. v. Tradition N. Am., Inc., 299 A.D.2d 204, 749 N.Y.S.2d 249 (N.Y. App. Div. 2002) (breach causation in contract claims; damages link to breach)
Reiss v. Fin. Performance Corp., 97 N.Y.2d 195, 738 N.E.2d 958 (N.Y. 2001) (interpretation not to strain contract language; intent of parties)
Consarc Corp. v. Marine Midland Bank N.A., 996 F.2d 568 (2d Cir. 1993) (contract interpretation and integrated reading of related documents)
Glickman v. New York Life Ins. Co., 291 N.Y. 45, 50 N.E.2d 538 (N.Y. 1943) (insurer reliance on warranties; increase in risk as basis for liability)
Klos v. Lotnicze, 133 F.3d 164 (2d Cir. 1997) (contract interpretation and intention of parties in reading instruments)