MBIA sues Countrywide Financial

Discussion in 'Wall St. News' started by Cdntrader, Oct 1, 2008.

  1. MBIA sues Countrywide Financial

    By Saskia Scholtes in New York

    Published: October 1 2008 23:55 | Last updated: October 1 2008 23:55

    MBIA Insurance is suing Countrywide Financial, alleging that the mortgage lender fraudulently induced MBIA to guarantee billions of dollars of Countrywide mortgage bonds that have cost the embattled bond insurer more than $459m.

    The suit, filed in New York state’s supreme court, raises fresh questions over the extent of Bank of America’s exposure to potential legal and regulatory liabilities incurred by Countrywide, which it acquired this year

    The California mortgage lender is already facing litigation filed by borrowers and states’ attorneys-general that claim Countrywide engaged in unfair and deceptive lending practices. BofA declined to comment.

    MBIA said in its complaint that Countrywide had “falsely represented” to both MBIA and investors that mortgage loans packaged into the guaranteed bonds had been originated in strict compliance with its underwriting standards.

    MBIA said that as Countrywide battled for market share during the mortgage boom, the lender had developed “a systematic pattern and practice of abandoning its own guidelines for loan origination: knowingly lending to borrowers who could not afford to repay the loans, or who committed fraud in loan applications”.

    The bond insurer is suing over guarantees it provided for $14bn of Countrywide mortgage bonds that packaged home equity loans and second lien mortgages originated between 2005 and 2007.

    Such loans have shown some of highest levels of late payment and default as house prices have fallen.

    MBIA said in the complaint that it had paid out more than $459m on its guarantees for these bonds and that it was “exposed to claims in excess of several hundred million dollars more”.

    Bond insurers promise to make good on payments of interest and principal if an insured bond suffers losses.

    The bond insurer asked the court to determine damages, including lost profits and opportunities, legal fees and payments on current and future claims under the bond guarantees.

    MBIA lost its triple A credit rating this year after it was hobbled by multi-billion dollar losses on a variety of complex structured securities it guaranteed during the credit boom.

    For years, bond insurers used their triple A credit ratings to guarantee payments on bonds issued by municipal and other relatively safe issuers. A move in recent years to guarantee riskier structured credit securities and mortgage debt led to a huge increase in expected losses.

    Copyright The Financial Times Limited 2008
  2. Daal


    funny how when it comes to suing all of the sudden they admit that their guarantee portfolio stinks. on the conference call of course everything is fine and there is no reason to raise loss estimates
  3. Damn. MER and CFC problems for BAC.

    What the hell's going on there?
  4. Morons, I've been calling for Mozillo to be drawn and quartered for a very long time.

    They should lock his tanned mobster ass up for life and confiscate every nickel from him and his family.

    He is a war criminal.
  5. Funny statisitic...

    I was told that in the last 3 years CFC didn't turn down a loan to a minority regardless of their credit score. This is coming from a very reliable source.

  6. How come no one is railing against all the deadbeat toothless scum who are defaulting?

    I blame them at least as much as any fat cat on Wall St.
  7. Brandonf

    Brandonf ET Sponsor

    So why are you calling for Mozzilo to be hung? Is it his fault that a bunch of people lied to him and committed fraud in order to barrow his money?
  8. The deadbeat toothless scum who are defaulting are the ones who lied on mortgage applications (saying it was primary residence) buying up all the condos and new homes they could assuming they would flip them for a profit. Once the market price fell below the purchase price, they all walked/ ran from the commitments. Now mortgage companies are sitting on thousands of condos and new homes worth much less then they have in them.

    As for owner/ occupied foreclosures, many of them are victims of mortgage scams like ARM's that are advertised $300k for only $599/ month. As we all know the resets are impossible for these folks to meet. I don't blame many of those consumers; I blame the mortgage originators. And as to the companies who bought the mortgages from the originators, it's really hard to believe legitimate companies were stupid enough to buy those mortgages - after all - they're in the mortgage business! As to the consumers who got scammed, remember, not everyone is as sharp as traders and the like. There are many people out there who aren't real bright and many of them are the ones who fell for the scam. The consumer is deemed to be naive; that's why we have consumer protection laws, unfair and deceptive trade laws, the CPSC and laws regarding advertising.

    As long as Goldman Sachs was making big bucks on this stuff, everything was fine. Now that GS (Paulson's butt buddies) are taking a hit, now and only now it's a problem.

    Corruption in America at its finest. Bush and Paulson are all over it.
  9. Exactly. The USA is going to learn a tough fuckin lesson on screwing with the system.

    Everyone's guilty of this shit and it's a small price to pay for a valuable lesson.

    -170 ATM on the futures.