In the never-ending onslaught of lawsuits filed in regards to toxic mortgages and the mortgage-backed securities into which those loans were shoveled, sliced, and sold, the battle between Bank of America (NYSE:BAC) and MBIA (NYSE:MBI) really stands out. The legal skirmishes -- including an effort by B of A to buy up MBIA's outstanding debt, and an unexpectedly comical cross-examination of the bank's CEO – have provided some unplanned entertainment for those who have been following this particular rumble.

A series of slaps and counter-slaps
MBIA's 2009 lawsuit against Bank of America, as successor to Countrywide Financial, followed the insurer's near decimation after paying on $3 billion worth of claims after the brittle MBSes created by Countrywide began falling apart.

Earlier that year, MBIA had received approval from regulators to split its healthy business, a municipal bond insurer, from the sickly unit, the mortgage insurer. Bank of America, as well as 17 other financial institutions, were sued over the split, including JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), and HSBC (NYSE:HSBC). The banks claimed, not surprisingly, that the separation of the weak from the strong, as well as a transfer of $5 billion from the mortgage insurance section to the bond insurance arm, left MBIA less able to pay out on claims.

Since 2009, only Bank of America and Societe Generale haven't settled with MBIA. The battle between the insurer and B of A has become somewhat high-profile, as the bank's recent hostile bid to buy MBIA's outstanding bonds shows. The bank failed in its bid, and the insurer was able to amend language pursuant to that debt, insuring its survival for a bit longer. B of A criticized MBIA for wasting policyholders' money. The insurer said the cash came from the holding company, so policyholders weren't affected. Besides, commented a company spokesman, Bank of America could help MBIA meet its obligations by buying back those crummy mortgages. Nah, nah.

Last but not least in the chuckles department is Rolling Stone columnist Matt Tiabbi's riff on CEO Brian Moynihan's deposition this past spring in regards to MBIA's lawsuit, where he pled ignorance of almost anything pertaining to Countrywide. Tiabbi notes that claiming forgetfulness is a popular method of denying knowledge of corporate shenanigans, but still gets a kick out of the extent to which Moynihan used the tactic -- to the point that you would be forgiven for thinking that he'd never even heard of Countrywide.

One Fool's take
Now that Bank of America is in a weakened negotiating position with MBIA, will settlement finally occur? Some analysts believe so, opining that the bank insured the MBSes through credit default swaps, which are not technically considered insurance products. This might make it harder for B of A to collect if MBIA goes into receivership.

Then there is concern about the risks for Bank of America if it does go to court. Not only is there a chance of a ruling on successor liability that will sting B of A, but the presiding judge has already ruled that the insurer needn't prove that the bank's alleged misinformation led to MBIA's losses.

Bank of America has settled suits with other mortgage insurers, notably Assured Guaranty and Syncora. Will it finally settle up with MBIA, as well? Entertainment value aside, there are serious bucks involved here, as well as the very real threats to each company's financial stability. For the sake of B of A's investors, let's hope the parties start serious settlement talks soon.

Fool contributor Amanda Alix has no positions in the stocks mentioned above. The Motley Fool owns shares of Bank of America, Citigroup, and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.