Countrywide target of suit
Claiming that it lost $1 billion on fraudulent mortgage-backed securities, a giant insurer filed a lawsuit Friday seeking to recover damages from Countrywide Financial Corp. and Bank of America Corp., which acquired Countrywide last year.
The Los Angeles County Superior Court lawsuit was filed on behalf of MBIA Insurance Corp. of New York.
It contends that Countrywide and its top executives failed to disclose that during the housing boom they had abandoned their stated lending standards, instead making unaffordable loans based on falsified income figures.
MBIA contends that the mortgage lender’s misrepresentations caused it to insure debt securities backed by pools of Countrywide loans, making it liable for the $1 billion in losses it already has paid out to holders of the securities and for hundreds of millions of dollars in additional claims.
A Bank of America spokeswoman declined to comment on the suit, which seeks to force the bank to cover MBIA’s losses.
The Charlotte, N.C., bank took on the legal liabilities of Calabasas-based Countrywide when it agreed to pay $4 billion in stock last year for what was then the nation’s largest mortgage lender.
To settle lawsuits brought by the attorneys general of 11 states including California, Bank of America already has agreed to reduce payments on certain adjustable-rate mortgages issued by Countrywide by a total of up to $8.4 billion.
--
More to Read
