Countrywide Sued Over Bad Mortgage Securities

September 29, 2010 No Comments »

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Another day, another Countrywide lawsuit…

Ambac Assurance Corp. has sued Bank of America (Countrywide) in New York state Supreme Court over $16.7 billion worth of shoddy mortgage-backed securities, according to a report from Businessweek.

The lawsuit claims former top mortgage lender Countrywide “fraudulently induced” Ambac to insure the bonds, despite their poor quality.

Ambac said 97 percent of the 6,533 mortgage loans reviewed across 12 securitizations sponsored by Countrywide failed to meet the mortgage lender‘s own underwriting guidelines.

Many of the loans were apparently extended to borrowers despite their limited ability or complete inability to meet mortgage payment obligations.

Think option arms with little or zero down…the loans in question were originated at the height of the housing boom, between 2004 and 2006.

Nine involve home equity lines of credit secured by second mortgages and three involve fixed-rate second mortgages.

Ambac has reportedly already paid out hundreds of millions of dollars in claims connected to the defaults which have fallen into the red at “extraordinary rates.”

Meanwhile, Countrywide has allegedly refused to repurchase the faulty loans or bring them into compliance.

The company believes it is entitled to damages because of Countrywide’s “massive fraud and pervasive and material breaches.”

Bank of America declined to comment.

Shares of Ambac have collapsed since the mortgage crisis got underway, falling from nearly $100 a share to just 55 cents today.

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