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HomeNational MortgageFinancial institution of America to pay $1.84B to settle crisis-era Countrywide case

Financial institution of America to pay $1.84B to settle crisis-era Countrywide case

Financial institution of America has agreed to pay $1.84 billion to the insurer Ambac to settle a long-running dispute over mortgage-backed securities from Countrywide, the mortgage large that BofA purchased in 2008.

The settlement will “resolve all pending Ambac lawsuits” and claims on the problem towards Financial institution of America, the financial institution mentioned in a securities submitting on Friday, noting that Ambac was in search of greater than $3 billion in damages. 

Ambac, which supplied insurance coverage insurance policies for Countrywide’s securities, alleged the mortgage lender misrepresented the standard of the loans it was making within the runup to the disaster. The insurer sought to place Financial institution of America on the hook for funds it needed to make for mortgage loans that went beneath.

A safety guard stands outdoors the Countrywide Monetary headquarters in Calabasas, Calif., in 2004.


The 2 sides confronted off in a New York state courtroom final month as a trial acquired underway, with Financial institution of America’s lawyer arguing that Ambac had been comfy taking up riskier loans in the course of the housing growth.

The settlement closes one other chapter on what rapidly proved to be an ill-advised acquisition from former CEO Ken Lewis. The Charlotte, North Carolina-based financial institution purchased Countrywide in July 2008 and shortly after began paying tens of billions of {dollars} in settlements with federal and state regulators.

In its submitting, Financial institution of America mentioned it had beforehand accrued for a lot of what it is paying as a part of the settlement. The financial institution will, nonetheless, document a pre-tax expense of $354 million within the third quarter, or 3 cents per share. 

The information brings some advantages to Financial institution of America regardless of the earnings hit, RBC Capital Markets analyst Gerard Cassidy wrote in a notice to shoppers.

“We view this information in a neutral-to-positive gentle as these lawsuits at the moment are behind the corporate, and firm sources wanted to handle these fits may be put to raised use, shifting ahead,” Cassidy wrote.

The financial institution declined to remark additional.

Ambac Monetary Group mentioned in a information launch that the settlement “materially exceeds” the restoration quantity it had recorded in its earnings in the course of the second quarter The insurer mentioned it can document a achieve of about $390 million over the following two quarters.

Ambac’s inventory was up about 14% to $14.55 a share as of the late morning on Friday.

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