Ambac Sues Countrywide, Citing ‘Massive Fraud’

Ambac Financial Group Inc. has filed a lawsuit against Bank of America Corp., charging ‘massive fraud’ by the bank's Countrywide mortgage unit on the loan quality and underwriting guidelines of $16.7 billion of residential mortgage-backed securitizations between 2004 and 2006.

Reuters reports that, according to the lawsuit filed in the New York State Supreme Court in Manhattan, Ambac says it had to pay $466 million on claims after an ‘extraordinary’ $2 billion in Countrywide loans either went into default or were written off. Ambac also claims that 97% of the 6,533 Countrywide loans it has reviewed did not meet the mortgage unit's underwriting guidelines, but Countrywide refuses to either bring them into compliance or buy them back.

‘Countrywide's pervasive misrepresentations and breaches pierce the very heart – and amount to a total repudiation – of the bargain struck by the parties,’ the complaint said.

SOURCE: Reuters

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