BofA Sues MGIC Over Unpaid Insurance Claims
Bank of America’s (BAC) Countrywide Home Loans unit sued Mortgage Guaranty Investment Corp. (MTG) over allegations the Wisconsin-based mortgage insurer denied millions of valid claims. The suit was disclosed in a Securities and Exchange Commission (SEC) filing. Countrywide and BAC Home Loans Servicing filed the suit against primary MGIC subsidiary Mortgage Guaranty Insurance Corp. (MGIC) in Superior Court of the State of California in San Francisco on December 17. The case seeks declaratory relief against MGIC for what it says are valid claims against mortgages that defaulted. The case also seeks a ruling on the “proper interpretation of the flow insurance policies at issue.” In the filing, MGIC said it intends to defend itself but is “unable to predict the outcome of this case or its effect on us.” MGIC is one of the country’s largest mortgage insurers, but has faced immense financial pressure amid continually increasing delinquency claims. The company reported a loss ratio of 331% in Q309, compared with a loss ratio of 222% in Q209, prompting Standard & Poor’s (S&P) to downgrade the firm in October. MGIC has struggled as it faces challenges in attempting to write new mortgage insurance through its MGIC Indemnity Corp. (MIC) subsidiary. MGIC and Bank of America declined to comment. Write to Austin Kilgore. The author held no relevant investments.