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New York-headquartered ""Ambac Financial Group, Inc."":http://www.ambac.com/index.html opened a lawsuit against ""Bank of America Corp."":https://www.bankofamerica.com/ over improperly underwritten loans the company says the bank's Countrywide unit used to induce it into purchasing mortgage-backed securities (MBS).
[IMAGE]After reviewing 6,533 of the 268,000 loans it insured for Countrywide, Ambac found that 97 percent of the reviewed loans didn't follow the underwriting guidelines Countrywide said it used to assemble loans.
Ambac said many of the loans were made to borrowers who had little or no ability to repay them.
[COLUMN_BREAK]The ""Association of Financial Guaranty Insurers"":http://www.afgi.org/ released an open letter on behalf of Ambac, which is a member of the organization, to Bank of America president and CEO Brian Moynihan on September 2.
""Each of our industry members that has insured BofA securitizations has at this junction concluded that well more than half of 2005/2006/2007 vintage non-performing HELOCs and first and second lien residential mortgage loans reviewed or sampled qualify for repurchase by BofA in the securitizations insured by them,"" the letter read.
The letter continued, ""We estimate that these BofA repurchase obligations aggregate in the range of $10 to $20 billion for our industry members alone.""
According to ""Bloomberg.com"":http://www.bloomberg.com/, Bank of America officials have said the bank must review each of the more than 250,000 loans to confirm underwriting mistakes or verify whether the loans met the guidelines.
Ambac alleges that the bank's efforts to review each loan have caused a breach of contract by delaying the repurchasing process.
Bank of America acquired Countrywide in 2008.
