The mudslinging between MBIA (MBI) and Bank of America (BAC) continues with MBIA asking a judge to compel BofA to disclose Countrywide documents that allegedly show aggressive lending at the subprime lender in spite of deteriorating credit standards.
An attorney for the bond insurer sent New York State Judge Eileen Bransten a letter asking the court to compel Countrywide (purchased in 2008 by BofA) to turn over documents related to “recently uncovered evidence of widespread mortgage origination fraud at Countrywide,” MBIA said in its letter. The documents MBIA is requesting cover everything from internal fraud investigations to information on whistleblowers who claim they were fired after looking into fraud at the subprime lender, MBIA claims.
MBIA declined to comment on the letter, but confirmed its existence.
Bank of America, which acquired Countrywide nearly four years ago, said in court records it was taken off guard by the bond insurer’s letter to the court, but will not object to MBIA’s motion for discovery.
However, the bank added, “We nevertheless were surprised by MBIA’s letter to the court, as we did not understand the parties to be at an impasse with regard to any of the discovery issues raised.” The bank says it is not aware of any discussions over the past five months related to several discovery issues that MBIA brought up in its letter.
Bank of America added,”MBIA’s letter, as usual, attempts to convert the parties’ minor discovery disputes into premature litigation of its claims. Throughout nearly three years of fact discovery, including extensive meet and confers between the parties, MBIA did not pursue any requests concerning alleged borrower or employee fraud at Countrywide.”
MBIA, which is suing Countrywide over alleged misrepresentations made about the quality of Countrywide loans that MBIA insured as securities, said it wants records from Countrywide’s fraud hotline.
The bond insurer says Countrywide also should turn over records tied to the internal investigations of whistleblower Eileen Foster, a former Countrywide vice president of fraud risk management. They also want records on Foster’s subsequent firing. Foster along with Mark Zachary, a former regional vice president at Countrywide, allegedly voiced concerns about fraud while working at Countrywide.
MBIA’s letter to the court says it wants e-mails tied to Zachary and Foster that were mentioned in investigative journalism reports. In addition, they want documents tied to two former Countrywide loan officers who MBIA alleges had some of their activities covered up due to fraudulent concerns, the MBIA letter contends.
MBIA also wants documents related to the company’s executive strategy committee, its risk management committee and the responsible lending/responsible conduct committee.
Furthermore, MBIA claims it has not received full documentation on Countrywide’s pricing of securitizations and their modeling on cash flow. MBIA also is pushing the court to compel discovery of the lender’s monthly risk-management reports.