MBIA Drops Suit Against Bank of America

After a contentious suit against ""Bank of America"":https://www.bankofamerica.com/ and Merrill Lynch, ""MBIA Inc."":http://www.mbia.com/ ended a lawsuit against the mortgage giant over $5.7 billion in bad credit default protection the insurer underwrote for the bank's mortgage-backed securities.

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According to the filing, ""MBIA"":http://www.mbia.com/ and ""Bank of America"":https://www.bankofamerica.com/ both agreed to voluntarily withdraw the claims and cover their fees for their separate cases.

As filed by ""MBIA"":http://www.mbia.com/, a proposed amended complaint attached the filing held that ""numerous detailed allegations making clear that Merrill possessed exclusive and unique knowledge of the defects in the collateral underlying the complex financial instruments that Defendants touted to investors and insurers.""

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The filing goes on to say that ""Merrill Lynch, through its loan origination subsidiaries, was aware of and involved in rampant underwriting failures in its own mortgage lending portfolio, and thereby knew, well ahead of the market├â┬ó├óÔÇÜ┬¼├é┬ª that significant defaults on the mortgage collateral underlying the CDOs were likely imminent.""

According to Reuters, ""MBIA"":http://www.mbia.com/ had sued Merrill in April 2009 with accompanying allegations that the bank committed fraud by overstating the quality of poorly written mortgage-backed securities. The original motion leveled accusations against Merrill that it ""offload[ed] billions of dollars"" in bad subprime mortgages and other risky debt.

The ""MBIA"":http://www.mbia.com/ said that it was in pursuit of several hundred million dollars that it accrued in losses over the subprime mortgage fallout.

A ""MBIA"":http://www.mbia.com/ spokesperson declined to comment.

A spokesperson for ""Bank of America"":https://www.bankofamerica.com/ could not be immediately reached for comment.

Reuters reported that ""MBIA"":http://www.mbia.com/ shares jumped 8.2 percent to close at $9.15 Tuesday, shortly following which ""Bank of America"": announced that it would cover settlements by paying bond insurers. The bank more recently settled with ""Assured Guaranty Ltd."":http://assuredguaranty.com/ to the tune of $1.6 billion.

This comes on the heels of reports that ""Bank of America"":https://www.bankofamerica.com/ will accelerate attempts to close on legal claims related to faulty mortgage-backed securities, according to ""_Dow Jones Newswires_"":http://www.dowjonesnews.com/newdjn/logon.aspx?AL=N. ""Bank of America"":https://www.bankofamerica.com/ shares fell 8 cents to close at $10.27.