Bank of America loses court case over home loans

Bank of America recently lost a court battle against MBIA  who was looking to recover losses on toxic home loans made by the bank's Countrywide Financial unit at the onset of the mortgage crisis.

MBIA claimed Countrywide tricked the bond insurer into guaranteeing payment on mortgage bonds, and the lender misrepresented the quality of the loans behind the bonds. The lawsuit is one of many cases Bank of America has lost to investors and companies that suffered significant losses from toxic mortgages sold by Countrywide just before the housing market collapsed in 2008, Bloomberg reported.

A similar lawsuit filed, by Syncora Guarantee against Countrywide, does not require Syncora to prove Countrywide misrepresented the quality of the home loans. However, MBIA must prove Countrywide did not disclose the quality of the loans being insured by the company, the source reported.

According to the Wall Street Journal, MBIA reached a settlement with Morgan Stanley last month over claims and counterclaims involving losses associated with toxic mortgages. In response to the lawsuits, both Bank of America and Morgan Stanley sued MBIA over the insurer's plan to split its businesses. Morgan Stanley dropped its lawsuit during the settlement, while Bank of America's case remains.

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