Financial services company MBIA Inc. is settling with Bank of America Corp. and its Countrywide unit after five years of litigation over Bank of America’s allegedly defective securitized mortgage loans, Bloomberg reports.
The deal stipulates that MBIA will get about $1.6 billion, and Bank of America will receive warrants for a 5 percent stake in MBIA.
MBIA sued Countrywide in 2008, claiming fraud and breach of contract with regard to securitized home equity loans—MBIA had promised payments to investors in those securities and alleged that Countrywide had not adequately represented the risks inherent in the loans. Bank of America acquired Countrywide that same year.
“We are very pleased to have reached a comprehensive settlement agreement with Bank of America that improves the outlook for MBIA Insurance Corp.,” MBIA CEO Jay Brown said in a statement on Monday. “While work remains to be done, today’s announcement represents a significant milestone in MBIA’s Transformation for the future and toward our goal of resuming growth in shareholder value.”
Before trading halted at midday, MBIA stock rose by 42 percent, according to CNN Money.
Read more about the housing crisis on InsideCounsel: