MBIA can sue Bank of America over bad loans
The mortgage insurer alleges that Countrywide Financial committed fraud as it bought insurance on mortgage securities.
Updated at 4:50 p.m. ET
MBIA Insurance (MBI) can proceed with a lawsuit alleging Bank of America's (BAC) Countrywide Financial committed fraud in obtaining insurance on billions of dollars of mortgage-backed securities, a judge ruled.
The insurer claimed in its suit that Countrywide "falsely represented" to MBIA, as well as to investors in trusts holding the securities, that Countrywide originated the mortgage loans in strict compliance with its underwriting standards and guidelines.
Bank of America shares were down 2.6% to $17.83 today, the third-worst performer among the 30 stocks in the Dow Jones Industrial Average ($INDU).
New York State Supreme Court Justice Eileen Bransten, in Manhattan, denied Bank of America's and Countrywide’s renewed motion to dismiss the bond insurer’s fraud claim.
In the Tuesday ruling made public today, Bransten also refused to dismiss a claim of successor and vicarious liability against Bank of America, which acquired Countrywide in 2009.
Bransten did dismiss a claim by MBIA of "negligent misrepresentation" against Countrywide, ruling the plaintiff had failed to show the commercial relationship existed between the two that would support the allegation.
MBIA said it was pleased by the ruling. Bank of American plans to defend itself "vigorously," a spokeswoman told Bloomberg.
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[BRIEFING.COM] The stock market capped the trading week with losses across the major averages. The S&P 500 fell 0.5% to surrender its weekly gain, while the Dow Jones Industrial Average (-0.7%) and Russell 2000 (-0.9%) underperformed. The two indices posted respective losses of 0.8% and 0.6% for the week.
Equity indices were pressured from the get-go after several heavyweights disappointed the market with their earnings and/or guidance, which led to some broader profit-taking. After ... More
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