Bank of America agreed to pay $1.7 billion to MBIA and will also receive right to buy a 4.9% stake in the bond insurer ending their legal dispute over mortgage-backed securities
Bank of America said it would pay $1.7 billion to bond insurer MBIA (Municipal Bond Insurance Association) to settle mortgage dispute between the two entities. In return, the lender would also get a 5% stake in MBIA, both the companies said.
Bank of America and MBIA had been fighting a battle over responsibility for losses during the 2007-2009 financial crisis.
In return, MBIA would drop demands that Bank of America’s Countrywide unit buy back the soured home loans that the insurer had guaranteed, says a report from Bloomberg news service.
Bank of America, the second-largest lender in the US and its Countrywide Financial unit cut corners to process home loans at high speeds and sold defective and fraudulent mortgages to Fannie Mae and Freddie Mac, the semi-public mortgage brokers, according to a complaint filed late last year by the US Justice Department.
The US government is seeking to recover over $1 billion of losses it said resulted from selling toxic mortgages to government-sponsored enterprises.
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