Bank of America lost a bid to prevent MBIA Inc

Bank of America Corp. lost a bid to prevent MBIA Inc. The use of statistical sampling to pursue repurchase demands in a lawsuit alleging it was fraudulently induced to insure $ 21 billion in mortgage-backed securities.

MBIA asked New York State Supreme Court Justice Eileen Bransten to allow
company

lawyers to develop tests on samples of 368 000 in 15 pools of mortgage backed securities to establish their claims of fraud, rather than go through each loan. Loan loan procedure can lead to "a delay of several years before the trial," said Philippe Z. Selendy, a lawyer in Armonk, New York, MBIA, in a letter of 13 October before the judge.

"The court finds no prejudice in the decision of the motion before it and that allows the use of statistically significant samples of securitization at issue," Bransten said yesterday. She said the defendants could also choose to use their "own sampling chosen from a statistically valid manner" to refute the arguments of MBIA.

Bank of America said it was "too early" in the proceedings to allow the selection of samples, according to court documents.

"Today's ruling is limited and procedural nature. There is nothing decided on the merits," said Jerry Dubrowski, a spokesman for Charlotte, North Carolina-based Bank of America, yesterday in an emailed statement. "As the tribunal, MBIA has to prove every element of their claims - that we can not do. We intend to continue to defend aggressively."

At least 12 claims

MBIA suit against Bank of America and its Countrywide unit is one of at least 12 claims submitted by insurers in state and federal courts led to the issuers of mortgage-backed securities, including Deutsche Bank AG, Credit Suisse and GMAC Mortgage LLC. mortgage companies owned by the government of Fannie Mae and Freddie Mac, and bond investors as MetLife Inc., are also pursuing claims originators repurchase the securities.

Bank of America is in talks with institutional investors, including Pacific Investment Management Co. Inc. and Roca, repurchase demands, the bank said in a statement Dec. 16.

The decision to allow sampling would reduce the time and cost of litigation support MBIA and other insurers and investors to pursue claims for repayment, New York lawyer David Grais said before the ruling was issued.

"We are working on strategies for dealing with disputes radically scale-back position," said Grais, representing two Federal Home Loan Banks and San Francisco, Charles Schwab Corp. in similar lawsuits against Bank of America and JPMorgan Chase & Co. " The viability of this depends on this decision. "

Loan quality

MBIA alleges that Countrywide, which Bank of America acquired in 2008, misrepresented the quality of loans in mortgage-backed securities to induce MBIA to insure against losses from defaults and foreclosures. Across the country knowingly lent to borrowers who could not afford the payments or fraud in their applications, according to the complaint.

Bransten Bank in April denied the U.S. request to be dropped from the lawsuit. Judges in other cases against the bank following the decision to allow Bank of America to be held as defendant for alleged fraud in Countrywide, said Grais, the law firm Grais and Ellsworth LLP.

MBIA paid $ 2.2 billion in guarantees on securities in dispute and may have to pay "hundreds of millions of dollars more" to reimburse investors who would receive money from the mortgages went into default, according to court documents.

MBIA said that his comments are that 91 percent of loans were delinquent or criminal "material discrepancies of the underwriting guidelines, such as borrower income, credit scores or debt-income ratios. The 15 sets of values in the application consists of 368,000 home equity lines of credit loans and second graders who were insured and sold to investors from 2004 to 2007.

Loan Loan

If you are forced to litigate on loan by loan, MBIA estimates that the preparation of its case against Bank of America would require 24 subscribers to conduct reviews for four years, at a cost of $ 75 million.

"The sampling was designed to provide a scientifically valid alternative, economical and timely exercise just too wasteful" Selendy, Quinn Emanuel Urquhart Oliver & Hedges, LLP in New York, wrote in his letter of 13 October the court.

To date, MBIA has filed lawsuits to repurchase more than 14,000 loans based on individual reviews, some of which have been paid, according to Selendy. The next hearing of the case is scheduled for April.

"Good candidate"

"Sampling has been used in many contexts in which the absolute numbers are opposed to the provision of the system," said Carl Tobias, a law professor at the University of Richmond in Virginia. "This seems a good candidate."

Much of the collection of evidence at trial was not performed, however, make a decision on the premature sampling, the Bank of America said in a hearing before September 27 Bransten.

"There is no advantage to this decision being made today, except for the convenience of MBIA, and unless put an arrow in its quiver," said Paul Ware, Jr., attorney for the Bank of America in demand in hearing. Ware declined to comment for this article.

FBR Capital Markets Corp. started range of banks for losses related to repurchase $ 54 million to $ 106 billion in a report dated 29 November. Bank of America, JP Morgan Chase, Citigroup Inc. and Wells Fargo & Co. to nearly 40 percent of these losses, FBR estimates, led by Bank of America is the possible cost of $ 20.4 million, or about 55 percent of its revenue estimates for fiscal year 2011.

Bank of America estimates that its mortgage repurchase claims to $ 12,900,000,000 at September 30, including $ 4,200,000,000 of insurance companies, as MBIA, according to a November 05 quarterly filing. The bank said it will refund claims totaling $ 205 million in the quarter ended in September.

Bank of America set aside $ 1.9 billion in the third quarter to meet redemption demands and hopes to have "several quarters to work through it," said chief executive Brian Moynihan, in an Oct. 19 earnings call.