Bank Agrees to Settle RMBS Litigation with Bond Insurer

A large bank has agreed to pay $1.84 billion to a bond insurer to settle remaining litigation with the bank over pre-2008 mortgage securitizations.  On October 7, 2022, the bank announced through an 8-K filing that it had reached a settlement to release the bank from “all outstanding claims” related to insurance policies that the bond issuer issued on a number of residential mortgage-backed securities (RMBS) preceding the 2008 financial crisis.  The bond insurer had filed multiple lawsuits against the bank concerning loans originated and underwritten from lenders that failed in the 2008 crisis.  The bond insurer claimed that when some of these loans failed, it was forced to pay out its policies to satisfy its RMBS investors.