Insurance Companies will not be left to hold the bag in silence. Those which issued Insurance Policies covering certain aspects of Mortgage Securitizations, such as Mortgage Insurance most notably, did so allegedly on the ground of representations and warranties given by Lenders. Lenders, like the frequent Defendant Countrywide now owned by Bank of America, allegedly represented and warranted that the securitization packages for which they requested Insurance, met the lenders' Underwriting guidelines. Allegedly, they did not, and the Insurance Companies are suing to force the Lenders to buy back the insured loan packages, thereby shifting the responsibility to pay from the Insurance Companies back to the Lenders.
Parenthetically, although these reported Claims and Causes of Action seem to be based on Contracts, the requested relief sounds very much like Rescission or the prevention of Unjust Enrichment, or other Equitable Remedies.
We are now at the beginning of this class of litigation. Reportedly, a New York State Supreme Court Justice has ruled that MBIA, one of the Plaintiffs in such a case, can prove its case through a statistical sample of insured loans rather than proving that representations and warranties were not met in a universe of many, many individual instances. The Justice relied on a case decided in 1856, writes David S. Hilzenrath, "Bank of America Hit With Setback in MBIA Insurance Mortgage Liability Lawsuit" (Washington Post Online, Friday, December 31, 2010).
The linked newspaper report also notes that Allstate Insurance filed its own such lawsuit against Bank of America last week. See id. (The article unfortunately does not mention the Court in which the Allstate lawsuit is pending, or the case numbers of either the Allstate or MBIA cases. When these are located, they will be posted here so that you can read the allegations for yourself if you choose.)
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