""Flagstar Bancorp, Inc."":https://www.flagstar.com/, and ""MBIA Inc."":http://www.mbia.com/ announced a settlement between the two companies related to transactions on securities that flopped during the housing crisis.[IMAGE]
MBIA made the announcement on behalf of MBIA Insurance Corporation, which ""earlier this year"":http://www.themreport.com/articles/mbia-sues-flagstar-for-false-mbs-representations-2013-01-15 filed suit against Flagstar for allegedly misrepresenting loans packaged in securities that MBIA insured in 2006 and 2007. The transactions involved approximately $1.1 billion of non-agency securities backed by second-lien loans, according to releases from both companies.
Under the terms of the agreement, Flagstar will pay MBIA $110.0 million, an amount ""consistent with [MBIA's] recovery expectations,"" CEO Jay Brown said. Troy, Michigan-based Flagstar does not expect any significant financial impact as a result.
""Today's announcement represents another major milestone in putting legacy challenges behind us,"" said Flagstar president and CEO Michael Tierney. ""We can now focus more time and attention on our national mortgage business and our community banking operations in Michigan.""
According to a statement from the company, MBIA will use the cash received to pay a portion of its secured loan from National Public Finance Guarantee Corp. in accordance with its terms.
""We will continue to focus on resolving our remaining litigation with other parties so that National Public Finance Guarantee Corp., our U.S. muni-only insurer, can resume its role as a leader in the U.S. public finance insurance market.""
MBIA isn't the only bond insurer to bring action against Flagstar over securities. In February, a ""district judge ruled"":http://dsnews.comarticles/flagstar-to-pay-assured-90m-in-rmbs-suit-2013-02-06 Flagstar must pay Assured Guaranty $90.1 million for defective securities, a decision the company ""intends to vigorously contest"" in an appeal.