Bank of America Corp (BAC): Bank Gets Slapped by Appeals Court

This is why yesterday’s ruling in MBIA’s favor on both of these issues probably wasn’t wildly celebrated by Bank of America Corp (NYSE:BAC)’s executives. On the loss causation issue, the appeals court affirmed the lower court without discussion. This makes it pretty clear that banks can no longer “point to external factors like the housing bust to excuse deficiencies in underlying mortgage loans,” said Frankel.

And on the second issue, the court found that MBIA is “entitled to a finding that the loan need not be in default to trigger [B of A’s] obligation to repurchase it. There is simply nothing in the contractual language which limits [Bank of America Corp (NYSE:BAC)’s] repurchase obligations in such a manner.” Consequently, in order to recover damages, MBIA is only required to show that it was fraudulently induced by Countrywide to write insurance on MBSes that were riskier than it had been led to believe. While this is still a considerable hurdle, it’s one less hurdle MBIA must jump.

The article Bank of America Gets Slapped by Appeals Court originally appeared on Fool.com and is written by John Maxfield.

John Maxfield owns shares of Bank of America. The Motley Fool owns shares of Bank of America.

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