(Bloomberg) — American International Group Inc., the largest commercial insurer in the U.S. and Canada, said it will get at least $650 million as part of a settlement with Bank of America Corp. tied to faulty mortgages.
The deal covers home loans on which the company took losses and also entitles the insurer to a share of what Bank of America pays to investors as part of a Countrywide repurchase settlement, New York-based AIG said today in a statement. The accord couldn't immediately be verified in court records.
Bank of America, based in Charlotte, North Carolina, has pushed to resolve liabilities tied to faulty mortgages that have cost it at least $50 billion since the financial crisis, most inherited from its 2008 purchase of Countrywide Financial Corp. The bank won court approval in January of an $8.5 billion settlement ending claims by investors in more than 500 mortgage- securitization trusts.
AIG and other objectors asked the court to reject the deal, which it said resolved claims for pennies on the dollar while investor losses totaled more than $100 billion.
AIG Bailout
The insurer took housing-related losses on bonds that it purchased for its investment portfolio and loans that it backed through its derivatives unit and mortgage-guaranty subsidiary. AIG received a bailout in 2008 that swelled to $182.3 billion after the company was overwhelmed by losses tied to subprime loans. The insurer repaid U.S. taxpayers in late 2012.
AIG sued Bank of America and Countrywide for $10 billion in damages in 2011, claiming it was misled into thinking the bank's residential mortgage-backed securities were issued according to underwriting guidelines that the bank had long abandoned.
Countrywide Financial, based in Calabasas, California, was the biggest U.S. residential home lender before the collapse of the housing market, originating or purchasing about $1.4 trillion in mortgages from 2005 to 2007. The bulk of them were sold to investors as mortgage-backed securities.
The case is American International Group Inc. v. Bank of America Corp. 11-cv-10549. U.S. District Court Central District of California (Los Angeles).
Copyright 2018 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
