Flagstar Bank is on the hook for another $110 million payout to a bond insurer who sued the Michigan-based bank over guaranteed mortgage-backed securities that soured.
MBIA, which also is looking for a hefty $3 billion settlement from Bank of America (BAC) over toxic Countrywide loans, announced it will drop its suit over $1.1 billion in securitized transactions backed by second-lien mortgages in exchange for a $110 million payment.
MBIA (MBI) said it will use the cash received to repay a portion of a secured loan from its National Public Finance Guarantee Corp. unit.
MBIA made headlines earlier this week when the New York Post suggested the bond insurer is running out of time to raise the cash necessary to prevent seizure by a New York State insurance regulator. MBIA rebutted those claims in a public statement.
For Flagstar, this is the second major payout to a bond insurer in 2013. A U.S. District Court Judge ordered Flagstar Bancorp to pay Assured Guaranty (AGO) $90.1 million in damages, plus interest to compensate the insurer for claims paid on defective mortgage securitizations that Assured guaranteed.
When adding in new claims and interest, the total pay-out figure in the Assured Guaranty case reached $106 million.