MBIA sues Countrywide
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- October
- 1
Lax lending standards and fraud by the giant home lender Countrywide Financial Corp. contributed to thousands of home mortgages going into foreclosure during the housing bust, leading to major losses for bond insurer MBIA Inc., according to a lawsuit filed by MBIA.
MBIA alleges in the suit that its insurance unit incurred $459 million in costs related to the bad loans at Countrywide and that additional claims exceed several hundred million dollars.
MBIA seeks damages from Countrywide in the suit filed Tuesday at the New York State Supreme Court in Manhattan.
“MBIA has been substantially harmed by Countrywide’s misrepresentations concerning the quality of loans it made. … MBIA has stated repeatedly that it will vigorously pursue all claims for improper practices by originators while continuing to meet its obligations to policyholders,†Kevin Brown, MBIA’s director of corporate communications, said in an e-mail statement.
MBIA’s insurance unit provided guarantees on billions of dollars of trust obligations of Countrywide mortgage-backed securities, but would have not done business with Countrywide if it had known about the lax standards, according to the lawsuit.
The lawsuit alleged that Countrywide abandoned its guidelines for loan origination as it aggressively pushed to expand its market share during the housing boom of recent years.
Countrywide’s questionable practices included “knowingly lending to borrowers who could not afford to repay the loans, or who committed fraud in loan applications, or who otherwise did not satisfy the basic risk criteria for prudent and responsible lending that Countrywide claimed to use,†the suit reads.
A spokeswoman for Bank of America Corp., which bought Countrywide earlier this year, declined comment on the case.
This entry was posted
on Wednesday, October 1st, 2008 at 6:16 pm by Jay Loomis.
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