The judge says MBIA must show that if the information was accurate it would have issued different policy terms or not have agreed to issue coverage.

Bransten also ruled that MBIA can seek rescissory damages from Countrywide instead of cancelation of the policies.

“To rescind the insurance policies would be to harm the policies' beneficiaries, the Noteholders, and may lead to greater economic harm,” she says.

However, Bransten says it will still be up to MBIA to prove “all elements of its causes of action,” which is to say that it must prove Countrywide did in fact misrepresent the risks.

Armonk, N.Y.-based MBIA sued Countrywide, now owned by Bank of America, in 2008, after it learned that the quality of the loans it insured were in fact sub-prime.

In response to the ruling,JayBrown, MBIA's chief executive officer, says in a statement, “We are very pleased by the Court's ruling granting our motion for summary judgment on key issues in MBIA's case against Bank of America and Countrywide. The ruling provides us with a straightforward path to recovery of our losses.”

During a conference call in early 2011, Joseph W. Brown Jr., chief executive officer of the company said he was dismayed by the fact that the banks were unwilling to pay back what was paid out after they were shown that the risks were misrepresented.

A Bank of America spokesman was quoted in one story as saying that MBIA still has a difficult obstacle to overcome because it must prove that its action harmed the company.