MBIA Inc. (MBI) will get about $1.6 billion as part of a deal to end five years of litigation against Bank of America Corp. (BAC) and its Countrywide unit over claims of defective securitized mortgage loans, a person familiar with the matter said.
As part of the settlement, Bank of America will get warrants for a 5 percent stake in MBIA, said the person, who asked not to be identified because the matter isn’t public.
MBIA first sued Countrywide in 2008 in New York state Supreme Court in Manhattan for fraud and breach of contract related to securitized home equity loans. Armonk, New York-based MBIA guaranteed payments to investors in the securities. Charlotte, North Carolina-based Bank of America acquired Countrywide that year. MBIA claimed the loans were riskier than represented.
MBIA surged as much as 57 percent after Dow Jones Newswires first reported the deal. MBIA was up more than 40 percent to $14.06 at 1:32 p.m. in New York after earlier climbing to as high as $15.45. The intraday jump is the most ever.
Bank of America’s stock climbed 52 cents to $12.76. The shares had advanced 5.4 percent this year through the end of last week.
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