Ambac Sues Bank of America Over Countrywide Bonds

[notesdev]

Ambac Assurance Corp. sued Bank of America Corp. over $16.7 billion of mortgage-backed securities, saying the bank’s Countrywide Financial Corp. unit fraudulently induced Ambac to insure bonds backed by improperly made loans.

Ambac found that 97 percent of 6,533 loans it reviewed across 12 securitizations sponsored by Countrywide didn’t conform to the lender’s underwriting guidelines, according to the complaint filed yesterday in New York state Supreme Court. Many of the loans were made to borrowers with limited or no ability to meet their payment obligations, Ambac said.

The lawsuit follows negotiations between Bank of America, which acquired Countrywide in 2008, and Ambac over mounting losses caused by loans made during the early 2000s as U.S. housing prices soared. Ambac has paid $466 million in claims from more than 35,000 Countrywide home-equity loans that have defaulted or been charged off, according to the lawsuit.

“Bank of America probably didn’t settle because they didn’t want to swallow the amount of money that it’s going to take to satisfy Ambac,” said Alan White, a law professor at Valparaiso University who specializes in housing industry issues. “Nobody wants to be left holding the bag.”



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Countrywide Statistics:
Fraudulent loans - 97%
Former CEO net worth - north of $600 million
Foreclosures caused by this fraud - unknown large number
MBS losses caused by this fraud - unknown very large dollar figure
Department of Justice prosecutions: 0


Anyone feel like investing in an economy that behaves like this?

[MineralMan]

1. The only good thing I see here is that companies are suing each

other over this crap. All that mortgage fraud may finally be catching up to the ones who perpetrated it. With some states and courts stopping foreclosures over fraudulent, illegal behavior on the part of lenders, it just may be that it's starting to turn around.

Time will provide a clearer look at the situation.

[billlll]

2. Huey Long wd've prosecuted. Aside..he even ended auctions of homes

For piddling small unpaid taxes

A horrid practice...auctions.. that is
Still done today

I can't believe it ... Tens of thousands in my county last year.

Does that sound accurate to u? TV got it wrong?

[freebrew]

5. Real Estate auctions are

food for the Realtors. They have inside information and can afford to buy those properties.
Here, homes are auctioned all the time for back property taxes. Problem is the buyer has to settle the note if any outstanding balance, over and above what was paid to the county.
The evicted home-owner gets nothing out of it, regardless the equity he had.

[Yupster]

3. The bonds would now be Bank of America bonds

so I don't see a big threat of default, so I don't see what the fight is over.

[notesdev]

4. It's a big chunk of change

Those bonds took huge losses, Ambac as the insurer was on the hook, they were given an apparently fraudulent impression of the quality of what they are insuring. BoA is already the recipient of a massive bailout and will not easily accept full responsibility for the actions of an acquisition before they acquired it that were not disclosed to them before buying.

[Yupster]

6. Is BAC saying it's not going to repay the bonds?

It's their responsibility. BAC knew Countrywide had the bonds out there right? Or are they saying they didn't know the bonds existed?

The insurer would only come into play if the company defaulted.

[A HERETIC I AM]

7. Wrong.

It's their responsibility. BAC knew Countrywide had the bonds out there right? Or are they saying they didn't know the bonds existed?

The insurer would only come into play if the company defaulted.

Not true. These are not obligations of the Bank of America Corporation. They are Mortgage Backed Securities. The cash flow that pays the interest and principal they pay comes from the stream of payments made by homeowners and any others who took out mortgages. If the mortgagee defaults, walks away or is otherwise foreclosed on, the stream of payments stops.

These bonds are not corporate debt of BofA. If they were then what you say would be true, but BofA didn't underwrite nor did it issue these instruments, Countrywide did. And even if Countrywide did issue them, that doesn't change their primary type.

The insurer in this case comes into play as soon as a series or tranche of these bonds default. The insurer pays to the bond holder, NOT BofA (unless they hold some of them as assets in their corporate portfolio).

[Yupster]

8. Ah - thanks

I thought they were just bonds.