NEW YORK ( TheStreet) -- Bank of America (BAC), may end up paying about $2 billion to settle a legal dispute with MBIA (MBI) 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.
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, Credit Suisse (CS), Morgan Stanley and Allied Irish Banks (AIBYY), 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.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV