Ambac Assurance filed a mortgage bond lawsuit against Bank of America (BAC) for what it claims were losses of hundreds of millions of dollars from insuring over $1.6B of securities. The holding company says that the loans were at least partially backed by high-risk mortgages from the bank’s Countrywide Home Loans unit.
According to the mortgage bond lawsuit, Ambac contends that Countrywide lied about the quality of its underwriting of loans that were backing the securities, which were issued in several transactions over a two-year period prior to the acquisition of the unit by Bank of America in 2008. The holding company said that it could be facing potential claims greater than $600 million. It claims that the loan pools backing the certificates it insured have lost billions of dollars. Ambac said that if it had known Countrywide lied it would have never guaranteed payments.
This is not the first time that Ambac has sued Bank of America Corp. In 2010, the company filed a $16.7 billion mortgage-backed securities case against the bank. In that securities case, Ambac claimed that Countrywide fraudulently persuaded Ambac to insure bonds with loans that were not properly made.
According to Ambac, 97% of 6,533 loans it looked at across 12 Countrywide-sponsored securitizations failed to conform with the underwriting guidelines of the lender and a lot of loans were issued to borrowers who were unlikely to be able to satisfy their payment duties. The Countrywide-sponsored home loan pools were made between 2004 to 2006.
Ambac sues Bank of America over Countrywide mortgage bonds, Reuters, December 31, 2014
Ambac Sues Bank of America Over Countrywide Bonds, Bloomberg, September 29, 2010
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$500M MBS Settlement Reached Between Countrywide and Investors, Stockbroker Fraud Blog, May 10, 2013