Bank of America Corp (NYSE:BAC) and MBIA Inc. (NYSE:MBI) reached an agreement to settle a dispute for $1.7 billion over who will pay for faulty mortgage backed securities issued during the housing boom, eliminating legal questions for both companies. MBIA has sued Bank of America for improper lending practices related to its acquisition of Countrywide Financial. The talks to reach a pact have been ongoing for six months, and the deal was reached over the weekend. New York Department of Financial Services Superintendent Benjamin Lawsky helped to set the deal.
Bank of America Corp (NYSE:BAC) will pay MBIA Inc. (NYSE:MBI) $1.6 billion in cash, along with some other consideration, and will issue MBIA a line of credit for $500 million. The bank will also take about a 5 percent ownership stake in MBIA’s holding company. Both Bank of America Corp (NYSE:BAC) and MBIA boards have approved the deal to proceed.
Q4 2020 13F Round-Up: Notable Hedge Fund Changes Including Pabrai, Abrams, Price, Klarman And More!
Below is our 13F roundup for some high profile hedge funds for the three months to the end of December 2020 (Q4). Also check our screener for more detail! Q4 2020 hedge fund letters, conferences and more The statements only include equity positions as 13Fs do not include cash and debt holdings. What's more, the Read More
The deal comes at a time when mortgage related claims are rising, the Wall Street Journal reported. It will also keep the Armonk, N.Y. insurance unit out of receivership, which happens when the state takes over management of the company. Mr. Lawsky has been working with MBIA Inc. (NYSE:MBI) and the banks that sued it over claims for faulty mortgage backed securities to reach agreements to settle such claims to avoid receivership.
MBIA Inc. (NYSE:MBI)’s Mr. Lawsky Helped Broke A Deal
On December 2011, Mr. Lawsky also helped broker a $1.1 billion deal between MBIA Inc. (NYSE:MBI) and Morgan Stanley. The settlement was enabled by an intercompany loan between MBIA’s healthier municipal insurance unit and MBIA’s mortgage insurance unit. Société Générale still has outstanding claims against MBIA.
In related news, MBIA Inc. (NYSE:MBI) also entered an agreement to settle the lawsuit filed against Flagstar Bank on January 11, 2013. The lawsuit is related to about $1.1 billion of securitization transactions on second lien mortgages, which were insured by MBIA Corp. in 2006 and 2007. MBIA Inc. (NYSE:MBI) will receive $110 million in cash and other consideration from Flagstar Bank in exchange for ending the litigation. MBIA will use part of the proceeds to repay part of its secured loan from National Public Finance Guarantee Corp. in accordance with its terms.
On Wednesday, MBIA’s first quarter earnings are scheduled to be announced. The housing recovery, together with the settlement of litigation, have helped MBIA stock to rebound from 2008 lows. Analysts expect MBIA Inc. (NYSE:MBI) earnings per share to come out at $0.15, which represent a 200 percent increase year over year. Revenues are estimated to come out at $104 million.