MBIA Inc., the bond insurer locked in a three-year legal battle with Bank of America Corp., is refusing to disclose information requested by the U.S. Securities and Exchange Commission including on reserves for GMAC Mortgage LLC and Residential Capital LLC bankruptcies.
In letters released today, the commission asked for more details about how the bond insurer ended $32.4 billion of gross insured commercial mortgage-backed securities, how it accounts for commutations of financial guarantee insurance contracts versus derivatives, and the amount it calculated for loss reserves and recoveries related to Ally Financial Inc.’s GMAC Mortgage and Residential Capital’s bankruptcies.
“Please explain to us why the increased likelihood of these bankruptcies did not result in a reduction of the value of your recoveries recorded from put-backs against these companies,” Jim Rosenberg, senior assistant chief accountant at the SEC, said in an Aug. 2 e-mail to MBIA Chief Executive Officer Jay Brown.
MBIA won’t release the information publicly, saying disclosing that would impact settlements with other counterparties.
“We would only disclose loss reserve or recovery balances, or changes thereto, related to specific counterparties if we deem such disclosures to be meaningful to investors, as such disclosures may have an adverse effect on our ability to negotiate settlements of such balances with counterparties,” MBIA Chief Financial Officer Chuck Chaplin said in an Oct. 26 letter.
MBIA, the Armonk, New York-based bond insurer that backed some of Wall Street’s most toxic mortgage securities, had targeted GMAC Mortgage and ResCap, now-bankrupt units of Ally Financial, for misrepresenting the quality of loans that were packaged into mortgage-backed securities, inducing it to guarantee the debt.
The SEC said in a Nov. 19 letter it completed the review and its comments “do not foreclose the Commission from taking any action with respect to the company or the filings.” Such correspondence is typically made public less than two months after a review’s completion.
Shares of MBIA rose 1 percent to $8.07 in New York. Kevin Brown, a spokesman for MBIA, declined to comment.
-- Editors: Richard Bravo, Mitchell Martin