Courthouse News Service, a newswire for attorneys, reports that MBIA Insurance Corp. is suing IndyMac Bank, claiming IndyMac ‘abandoned any reasonable and prudent underwriting standards,’ leaving MBIA holding the bag.
MBIA, which is expected to pay out more than $1 billion in guarantees as a result of IndyMac's allegedly shoddy lending practices, filed the suit in the Los Angeles Superior Court.
‘MBIA provided financial guaranty insurance in the form of guarantees of the trust obligations to make principal and interest payments on the loans,’ the Courthouse News Service report states.
MBIA says IndyMac knowingly loaned money to borrowers who could not afford the mortgages and encouraged its employees to inflate borrowers' incomes on applications.
So far, MBIA has paid more than $487 million on its guarantees, and the insurer expects to pay another $566 million.
SOURCE: Courthouse News Services