Bank Of America To Pay $375 MillionTo Settle Fraud Claims With Insurer

Bank Of America To Pay $375 MillionTo Settle Fraud Claims With Insurer

NEW YORK - (Mealey's) Bank of America Corp. and its Countrywide Home Loans Inc. affiliate will pay $375 million to a financial guarantee insurer to settle claims that Countrywide misrepresented the standards used in underwriting mortgage loans that served as the basis for five securitizations of mortgage-backed securities, according to a press release issued July 18 (Syncora Guarantee Inc. v. Countrywide Home Loans Inc., No. 650042/2009, N.Y. Sup., New York Co.).

According to the press release, which was issued by holding company Syncora Holdings Ltd. (the Company), parent company of Syncora Guaranty Inc., Countrywide Home Loans, Countrywide parent company Bank of America Corp. and two other Bank of America subsidiaries have agreed to pay the $375 million in exchange for release of all claims against them.

"In addition, in an effort to terminate other relationships between the parties, the Company transferred assets to subsidiaries of Bank of America Corporation and subsidiaries of Bank of America Corporation transferred or agreed to transfer to the Company certain of the Company's and Syncora's preferred shares, surplus notes and other securities," according to the press release, which is available online at http://phx.corporate-ir.net/phoenix.zhtml?c=198015&p=irol-newsArticle&ID=1715608&highlight=.

Misrepresentations Made

Syncora Guaranty sued Bank of America, Countrywide Home Loans, Countrywide Securities Corp. and Countrywide Financial Corp. in the New York County Supreme Court, alleging that the defendants misrepresented the standards used in underwriting mortgage loans that served as the basis for "four securitizations of home equity mortgage loans (HELOCs) and one securitization of closed-end second originated by Countrywide and insured by Syncora."

In particular, Syncora Guaranty contends that the defendants "represented to Syncora that Countrywide had acted prudently and responsibly in underwriting the loans:  among other things, Countrywide represented to Syncora that the loans in the portfolios conformed with its published underwriting guidelines and that it knew nothing about the loans that would cause a reasonable underwriter to conclude they would default.  These representations were false."

Syncora Guaranty stated claims for fraudulent inducement, negligent misrepresentation, breach of contract, breach of the implied duty of good faith and fair dealing, indemnification and successor and vicarious liability.

Counsel

Syncora Guaranty is represented by Mark P. Goodman, Donald W. Hawthorne, John S. Craig and Felix J. Gilman of Debevoise & Plimpton in New York.

The defendants are represented by Mark Holland of Goodwin Procter in New York and Sarah Heaton Concannon of Goodwin Procter in Boston.

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