Bank of America has agreed to pay the bond insurer MBIA $1.6 billion to settle a five-year-old dispute over losses related to soured mortgage-backed securities, according to news reports.
B of A will also provide the bond insurer a credit line of $500 million and take a roughly 5% stake in MBIA's holding company, Dow Jones reported Monday, citing unnamed sources.
A spokesperson for Bank of America declined to comment. MBIA did not immediately respond to a request for comment.
The announcement comes less than a week after New York State Supreme Court Justice Eileen Bransten denied both companies a motion for summary judgment on the question of whether B of A is liable for the $4.5 billion of mortgage-backed securities made by Countrywide Financial. B of A acquired Countrywide in 2008.
MBIA filed the lawsuit in September 2008, claiming Countrywide fraudulently induced it to insure the securitizations by misrepresenting the underlying loans.
B of A's shares were up nearly 5%, to $12.81, Monday afternoon on news of the settlement. MBIA's shares rose 46%, to $14.33.
MBIA has sued more than a dozen banks over losses it suffered during the financial crisis. Last week, it
