MGIC, Countrywide Reach Settlement on Rescission Dispute
Mortgage Guaranty Insurance Corp. has entered into separate settlement agreements with Bank of America and Countrywide Home Loans (now owned by B of A) that settle the dispute over its rescission and denial policies.
The settlement was revealed in an 8-K filing by MGIC Investment Corp., the parent company, a copy of which was obtained through DisclosureNet.
In its 4Q12 results release, MGIC took a $100 million charge to earnings in anticipation of this settlement being reached.
According to the 8-K, as of Nov. 1, 2011, the day MGIC voluntarily suspended rescissions on Countrywide loans, the mortgage insurer will now waive certain of its rescission rights.
MGIC will be reimbursed by B of A and Countrywide for the difference between the claims MGIC paid in full from Nov. 1, 2011 through implementation of these agreements.
For subsequent claims, MGIC will be responsible on a net basis for a reduced amount on the mortgage insurance claims.
The settlement payments by MGIC and an amount of cash payable by B of A and Countrywide are being placed into escrow.
There will also be a hold on pending arbitration between MGIC and the lenders with an eye towards an eventual dismissal.
The agreements do not resolve assertions by Countrywide that MGIC has improperly curtailed numerous coverage claims. Countrywide said the dispute covers $40 million. MGIC, B of A and Countrywide have separately agreed to mediation, and if that fails, arbitration.
The MGIC/B of A agreement needs to be approved by Fannie Mae and Freddie Mac.
The agreement with Countrywide includes loans securitized in private-label securities. It will not be implemented until the B of A agreement is implemented and then only to the extent that it is approved by or on behalf of the investors.