On May 2, MBIA Insurance Corporation announced that it reached a settlement with Flagstar Bank in its lawsuit arising out of $1 billion in Flagstar-sponsored MBS that MBIA insured. MBIA sued Flagstar for breach of warranty under the insurance agreements, breach of the repurchase protocol, material breach of the insurance agreements, and reimbursement. MBIA alleged that representations and warranties made by Flagstar about the insured mortgage loans and about Flagstar’s operations and quality-control procedures were false. Under the terms of the Settlement Agreement, MBIA will receive $110 million in cash and other consideration in return for termination of the pending lawsuit. Press Release.
Flagstar Bank
MBIA Sues Flagstar Bank In Connection With Insurance Of $1 Billion in RMBS
On January 11, monoline insurer MBIA Insurance Corp. sued Flagstar Bank and its affiliates for breach of contract in the United States District Court for the Southern District of New York. MBIA alleges that it insured $1 billion in RMBS for Flagstar in 2006 and 2007. The complaint claims that Flagstar made misrepresentations about the allegedly defective loans underlying the securities. Further, MBIA alleges it has made claims payments in excess of $165 million, and that Flagstar has breached its contractual obligation to repurchase the allegedly defective loans. Complaint.