NEW YORK (
Bank of America
(BAC - Get Report)
, may end up paying about $2 billion to settle a legal dispute with
(MBI - Get Report)
following a ruling in MBIA's favor on Tuesday, according to an analyst who has been following the case.
MBIA has accused Bank of America's Countrywide home loan unit of fraud and breach of contract related to 15 mortgage securities. In separate litigation, Bank of America is one of five remaining banks out of an original 18 that sued MBIA over a 2009 restructuring of the company.
A settlement between the two companies is widely expected, leading to both lawsuits being dropped, as happened last month with
involving MBIA and
(MS - Get Report)
BTIG analyst Mark Palmer, who follows MBIA, believes a payment of about $2 billion from Bank of America to MBIA would be enough to make both cases go away.
"Could the figure be higher than $2 billion? It could, but I think that if there were an announcement wherein MBIA received $2 billion and the fraudulent conveyance case was dropped, that would be a successful outcome for both sides," Palmer says.
In filings with the Securities and Exchange Commission, MBIA recorded $2.8 billion it expected to recover from litigation against Bank of America,
(CS - Get Report)
, Morgan Stanley and
Allied Irish Banks
, but management told analysts on the company's Nov. 10 third quarter conference call it has paid out $5 billion in claims so far
"When the cases are finally resolved, we expect to recover the vast majority of our losses, not just those for which we have already recorded a recovery," MBIA CEO Jay Brown told analysts on the call.