When Bank of America (NYSE:BAC) Countrywide Financial, concerns were raised about the liability they were buying with that deal, and that fallout continues to rise, as the latest case involves a fraud claim from one of the units of MBIA Inc. (NYSE:MBI) over billions in home-equity lines of credit which had been securitized.
Other elements of the decision included the dismissal of a negligent claim of misrepresentation, while a breach of contract claim has yet to be ruled on.
Bank of America spokeswoman Shirley Norton noted, “This is a procedural ruling and not a ruling on the merits or facts of the case. We will continue to vigorously defend against the allegations.”
The lawsuit centers around what MBIA asserts were lending practices at Countrywide which had been changed at the core and resulted in the risk in relationship to their loan portfolio being much higher than they were aware of.
There are 15 pools of home equity lines of credit which had been securitized that are part of the case going forward.
MBIA said this about the judges decision:
“We are pleased that the court has allowed our case to move forward against both Countrywide and Bank of America. Importantly, the judge recognized the validity of our position that there was a de facto merger between Countywide and Bank of America. MBIA has been substantially harmed by Countrywide and Bank of America and we will continue to pursue all available remedies.”
MBIA provided financial guarantees on these pools of securitized home equity lines of credit in the billions, and are trying to pass some of that liability onto Bank of America through this lawsuit for the reasons cited.
