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MBIA Declined to Give SEC Requested GMAC Valuation Information

DEC 19, 2012 11:34am ET
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MBIA Inc., the bond insurer locked in a three-year legal battle with Bank of America Corp., is refusing to provide information requested by the Securities and Exchange Commission including on reserves for GMAC Mortgage LLC and Residential Capital LLC bankruptcies.

In letters released today, the commission asked for more details about how the bond insurer ended $32.4 billion of gross insured commercial mortgage-backed securities, how it accounts for commutations of financial guarantee insurance contracts versus derivatives, and the amount it calculated for loss reserves and recoveries related to Ally Financial Inc.’s GMAC Mortgage and Residential Capital’s bankruptcies.

“Please explain to us why the increased likelihood of these bankruptcies did not result in a reduction of the value of your recoveries recorded from put-backs against these companies,” Jim Rosenberg, senior assistant chief accountant at the SEC, said in an Aug. 2 e-mail to MBIA chief executive officer Jay Brown.

MBIA declined, saying disclosing that would impact settlements with other counterparties.

“We would only disclose loss reserve or recovery balances, or changes thereto, related to specific counterparties if we deem such disclosures to be meaningful to investors, as such disclosures may have an adverse effect on our ability to negotiate settlements of such balances with counterparties,” MBIA chief financial officer Chuck Chaplin said in an Oct. 26 letter.

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