A pair of Bank of America subsidiaries, Countrywide Home Loans, and BAC Home Loans Servicing, is suing Mortgage Guaranty Insurance Corp. (MGIC), seeking a declaratory judgment against the mortgage insurer.
The complaint states MGIC is denying paying Countrywide "millions of dollars in valid mortgage insurance claims."
In a Securities and Exchange Commission filing, MGIC Investment Corp. said it intends to defend the mortgage insurer against the allegations "vigorously," although it added a disclaimer stating it is unable to predict the outcome of the case or its effect on the company.
Countrywide had obtained mortgage insurance on the loans in question via a flow policy. According to the court filing, MGIC is denying claims based on allegations that misrepresented information was provided by or on behalf of the borrower. Countrywide counters in the filing that MGIC is basing its decisions on "second or third-hand accounts of one-sided, self-serving and/or unsubstantiated hearsay and would not be admissible."
The court filing does state a substantial number of loans involved are stated income loans and MGIC was aware of that fact.
The filing said MGIC did not demand income information for all loans, not just the stated income loans, which Countrywide submitted for insurance underwriting.
The suit also alleges MGIC is denying claims payments based on faulty review appraisals the mortgage insurer is conducting.