This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

MBIA: Mortgage Putback Winner

NEW YORK ( TheStreet) -- MBIA (MBI - Get Report) was the winner among major financial services companies on Wednesday, as the bond insurer's shares popped 18% to close at $10.41.

The broad indexes saw slight declines on a light day for economic releases. The KBW Bank Index (I:BKX) rose slightly to close at 55.04, and the KBW Insurance index rose 0.5% to close at 138.91.

The move in MBIA's shares underlined the major stakes the company has in lawsuits similar to the one that was decided late on Tuesday in favor of rival bond insurer Assured Guaranty (AGO - Get Report).

Assured Guaranty was awarded $90.1 million plus expenses after claiming that the main subsidiary of Flagstar Bancorp (FBC) made fraudulent representations that caused the bond insurer $116 million in damages and expenses. Flagstar said in a statement that it intended "to vigorously contest the outcome on appeal."

Such an appeal may be a tall order, and would probably center around Flagstar's contention that Assured Guaranty's sampling process for the two pools of securitized home equity loans in question was flawed. Judge Jed Rakoff of the U.S. Southern District of New York wasn't buying Flagstar's arguments, and said that the loan sampling methodology by Assured Guaranty's expert witness was "not only appropriate to the courtroom but corroborated by the Court's own review." Rakoff also said that the expert witness's testimony was "fully credible."

Assured Guaranty's shares rose over 10% to close at $19.56.

MBIA has a similar mortgage putback lawsuit pending against Flagstar, seeking $165 million in damages over two mortgage loan securitizations. Flagstar will easily absorb a "worst-case loss of $1.50 per share to $2.00 per share" to tangible book value from the MBIA and Assured Guaranty lawsuits, according to FBR analyst Paul Miller.

But MBIA has bigger fish to fry, with a mortgage putback lawsuit pending against Bank of America which several analysts believe could be settled for between $2 billion and $3 billion, although the bank appears to be delaying a settlement while negotiating other mortgage repurchase claims with private investors.

Bank of America on Jan. 7 announced a mortgage repurchase settlement with government-sponsored mortgage giant Fannie Mae (FNMA). In its agreement to end the long-running and high profile dispute, Bank of America agreed to pay $3.6 billion in cash to Fannie and to pay roughly $6.75 billion to repurchase 30,000 mortgage loans.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AGO $26.65 -1.30%
BAC $17.50 0.34%
MBI $6.55 -3.20%
AAPL $117.82 -0.18%
FB $105.47 0.06%


Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs