According to a Bloomberg report, New York State Judge Eileen Bransten ruled that MBIA only needs to show that the bank misrepresented the quality of the loans backing the bonds that the insurer guaranteed, rather than establish that the loans caused the losses that MBIA is seeking to recover.
‘No basis in law exists to mandate that MBIA establish a direct causal link between the misrepresentations allegedly made by Countrywide and claims made under the policy,’ Bransten wrote in her decision.
MBIA CEO Jay Brown praised the ruling in an email statement. ‘The ruling provides us with a straightforward path to recovery of our losses,’ he wrote.
Lawrence Grayson, a spokesperson for Bank of America, told Bloomberg that the ruling is not a setback for the Charlotte, N.C.-based bank, which purchased Countrwide in 2008.
‘MBIA still must prove that it was damaged by Countrywide's allegedly material misrepresentations, which as the court stated, will not be an easy task,’ Grayson said.