Insurer settles multi-million dollar suit over loan losses

by Diana Aqra24 Jun 2013
A financial insurance company has settled for $105m to drop its lawsuit against a bank for losses on low-quality loans.
 
Assured Guaranty will drop its lawsuit against Flagstar Bank for claims Assured had to pay out on home equity loans it sold.
 
From 2005 to 2006, Flagstar acquired and or originated US 902.2m of home equity loans that it then sold into securitizations that Assured guaranteed.
 
Like many financial insurance companies, including mortgage insurance companies, Assured suffered serious losses for loans that were of lesser quality than insurers’ believed.
 
Some have claimed, however, that insurers knew very well what they were insuring when they did, and made a profit at the time for doing so.
 
Insuring bad deals eventually put financial insurance companies out of business, or in deep restructuring situations, however.  Financial Guaranty Insurance Corporation (FGIC), for example, was put under receivership by its regulator in New York following the financial crisis, MBIA was forced to restructure, and mortgage insurers like Genworth and Private Mortgage Insurance all went downhill for all of the bad mortgages and mortgage-backed securities deals they insured.

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