If in doubt, sue Countrywide…that’s what battered down AIG just did.
United Guaranty Mortgage Indemnity Co., a unit of insurance company AIG, filed a lawsuit against the now defunct mortgage lender, accusing the company of misrepresenting the quality of the loans the company insured, according to a Bloomberg report.
The mortgage insurance unit said Countrywide sought insurance for the mortgage loans it wrote to boost the credit ratings of mortgage-backed securities they were bundled into, all the while claiming the loans were originated according to strict underwriting guidelines.
It turns out, however (surprise), that many of the loan files tied to the securities were either written in violation of Countrywide’s own underwriting guidelines, or contained defects, such as bogus social security numbers, missing paperwork, or misrepresented credit scores.
That, the company alleges, has led to an unprecedented number of defaults, resulting in over $30 million in insurance claims paid out by United Guaranty, with exposure to “several hundred million dollars more” still out there, somewhere.
The AIG unit is seeking unspecified punitive damages, and wants the insurance policies and corresponding payments on the loans canceled.
The timing of the lawsuit is interesting, as AIG has been under fire from, ahem, the world lately, after receiving more than $170 billion in government aid and subsequently paying out hundreds of millions in employee bonuses.
Countrywide has been the target of a number of lawsuits for the past year and change now, many predatory lending claims carried out by state Attorney Generals that resulted in million-dollar settlements.