MBIA: Second Lien Losses May Be Recovered

MBIA Inc., Armonk, New York, said it paid a total of $1.4 billion in claims associated with its second lien residential mortgage exposures in 2008 but noted it could see some reimbursement for these claims if pending legal challenges against two unnamed seller-servicers go its way. "Based on a thorough analysis of the claims paid, MBIA has found that these claims resulted from defaulted mortgages that were ineligible assets in the securitizations the company insured," said the bond insurer, which recently split its more problematic structured finance business — including its mortgage-related exposures — into separate units from its municipal business. Although strained by these exposures, the company's chief executive Jay Brown said it believes it still has adequate liquidity. MBIA took a net loss of $2.7 billion during 2008, compared to a $1.9 billion net loss in 2007. During the fourth quarter of last year, it took a net loss of $1.2 billion compared to a net loss of $2.3 billion during the same period in 2007.