Am­bac sues BofA over se­cu­ri­ties

Firm says the bank’s Coun­try­wide unit misled it to in­sure loan-backed bonds.

Los Angeles Times - - Business - bloomberg news

Am­bac As­sur­ance Corp. sued Bank of Amer­ica Corp. over $16.7 bil­lion of mort­gage-backed se­cu­ri­ties, say­ing the bank’s Coun­try­wide Fi­nan­cial Corp. unit fraud­u­lently in­duced Am­bac to in­sure bonds backed by im­prop­erly made loans.

Am­bac found that 97% of 6,533 loans it re­viewed across 12 mort­gage-backed bond is­sues spon­sored by Coun­try­wide didn’t con­form to the lender’s un­der­writ­ing guide­lines, the com­plaint filed Tues­day in New York State Supreme Court said. Many of the loans were made to bor­row­ers with limited or no abil­ity to meet their pay­ment obli­ga­tions, Am­bac said.

The law­suit fol­lows ne­go­ti­a­tions be­tween Bank of Amer­ica, which acquired Coun­try­wide in 2008, and Am­bac over mount­ing losses caused by loans made dur­ing the early 2000s as U.S. hous­ing prices soared. Am­bac has paid $466 mil­lion in claims from more than 35,000 Coun­try­wide home­e­quity loans that have de­faulted or been charged off, ac­cord­ing to the law­suit.

“Bank of Amer­ica prob­a­bly didn’t set­tle be­cause they didn’t want to swal­low the amount of money that it’s go­ing to take to sat­isfy Am­bac,” said Alan White, a law pro­fes­sor at Val­paraiso Uni­ver­sity who spe­cial­izes in hous­ing in­dus­try is­sues. “No­body wants to be left hold­ing the bag.”

Spokes­men for the Char­lotte, N.C., lender and Am­bac de­clined to com­ment.

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