Following its recent loss in a similar case, Flagstar Bancorp Inc. has decided to settle a lawsuit filed by a bond insurer.
MBIA Insurance Corp. filed a lawsuit in a New York federal court on Jan. 11 against Flagstar ABS LLC.
MBIA alleges that it paid out $165 million in claims on mortgage-backed securities that were misrepresented by Flagstar.
The case involves $1.1 billion in non-agency MBS backed by second liens.
Flagstar reportedly refused to honor repurchase demands on two securitizations issued is 2006 and 2007.
But the two firms have reached a settlement.
In an 8-K filing with the Securities and Exchange Commission on Thursday, Troy, Mich.-based Flagstar disclosed that it entered an agreement to settle the lawsuit for $110 million.
MBIA-parent MBIA Inc. said it will terminate the lawsuit as required in the settlement agreement.
“We are pleased to have reached a settlement with Flagstar that brings an end to our litigation without further delay and expense and results in cash and other consideration to MBIA Insurance Corp. in an amount consistent with our recovery expectations,” said Jay Brown, chief executive officer of MBIA Inc., in the announcement. “We will continue to focus on resolving our remaining litigation with other parties.”
On Feb. 5, a judge in the same Manhattan federal court ruled against Flagstar Bank FSB in a lawsuit filed in April 2011 by Assured Guaranty Municipal Corp. Flagstar was ordered to pay $90 million to satisfy outstanding repurchase demands.
Flagstar said it would fight the district court’s decision in the Assured case.
