AIG Hammers Bank of America on Murky Mortgages

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

As the date draws near for the May 30 Article 77 hearing on whether or not Bank of America's (NYSE: BAC  ) $8.5 billion settlement with 22 institutional investors will go forward or back to the starting gate, one thing is becoming very clear: Revived insurance giant AIG (NYSE: AIG  ) isn't about to let B of A off the hook for a slew of disintegrating mortgage securities sold through Countrywide.

Last Friday marked the day by which Judge Barbara Kapnick pronounced objections to the settlement had to reach her New York City courtroom. According to Reuters, AIG and a handful of Federal Home Loan banks are still in opposition. For its part, AIG is declaring the settlement "unreasonably and unjustifiably small."

AIG is determined get some of its own back
AIG is feeling its oats again, and is setting out with vigor to squeeze some reparation from those that assisted with the megainsurer's downfall. One of those entities is Bank of America, the not-so-proud owner of Countrywide.

Recently, AIG won a victory over B of A in another suit over $28 billion of crummy mortgage-backed securities, in which the insurer claims that Countrywide and Merrill Lynch lied about the quality of those instruments.

AIG is looking for a $10 billion payday in that case, which a judge just agreed should be heard in state court, as AIG wanted, rather than federal court -- which was Bank of America's preferred venue. Despite promises to Bank of America from the New York Federal Reserve Bank of New York, AIG is not backing off its resolution to get back some of the money it lost.

MBIA suit still alive and well, too
Similarly, the ongoing skirmish between monoline insurer MBIA (NYSE: MBI  ) and B of A is also heating up, despite the fact that the insurer did not win a summary judgment in its suit against the bank, which means the whole mess is headed for trial. This doesn't translate into a cakewalk for B of A, though. The issue of whether or not the big bank is liable for Countrywide's prior behavior is still up in the air, while earlier court rulings have stated that Bank of America may be required to repurchase even those loans that are not currently in default.

Regulators drop their opposition
There were a few points of light for B of A in Friday's news, however. While stopping short of supporting the settlement, the Attorneys General of New York State and Delaware have declared they no longer have objections to the deal. In addition, the Federal Housing Finance Agency also dropped its opposition to the settlement.

While regulators have taken some of the pressure off, others like AIG are clearly willing to go to the mat over this issue. If investors get good news at the Article 77 hearing, expect AIG to show Bank of America no mercy in the coming months on the murky mortgage front.

At the end of last year, AIG was the favorite stock among hedge fund managers. Have they identified the next big multi-bagger, or are the risks facing the insurance giant still too great? In The Motley Fool's premium report on AIG, Financials Bureau Chief Matt Koppenheffer breaks down the key issues that you need to know about if you want to successfully invest in this stock. Simply click here now to claim your copy, and you'll also receive a full year of key updates and expert analysis as news continues to develop.

Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 06, 2013, at 1:29 PM, my2cents4u wrote:

    Classic insurance company behavior: rape the insureds for their premiums year after year then deny, sue, or stall payment by any means, legitimate or not, when the piper plays. Classic!

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2410162, ~/Articles/ArticleHandler.aspx, 9/28/2016 11:49:13 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,188.92 -39.38 -0.22%
S&P 500 2,154.08 -5.85 -0.27%
NASD 5,285.30 -20.41 -0.38%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/28/2016 11:34 AM
AIG $58.81 Up +0.30 +0.51%
American Internati… CAPS Rating: ****
BAC $15.16 Down -0.13 -0.83%
Bank of America CAPS Rating: ****
MBI $7.49 Down -0.04 -0.47%
MBIA CAPS Rating: ***