Posted on Wednesday, November 17, 2010
Bank of America says Old Republic International Corp. is “wrongfully withholding payment” on hundreds of millions of dollars in mortgage insurance claims on home equity loans that have defaulted.
BofA has filed a lawsuit against the mortgage insurer with a federal court in Charlotte, North Carolina, seeking to recover more than $160 million in damages.
The bank says in the complaint that Old Republic “has denied and continues to deny” what BofA called “valid” insurance claims based on “unreasonable interpretations” of the company’s standard mortgage insurance policy.
Bank of America says in more prosperous times, Old Republic reaped hundreds of millions of dollars through its participation in the home mortgage market, selling mortgage insurance policies to insure against losses to lenders in the event of borrower default.
The bank says its claims to Old Republic picked up significantly when the housing market collapsed in 2007. But now that the mortgage insurer faces steep financial losses because of the economic downturn, it has failed to pay claims in accordance with its policy, according to the court documents filed by BofA.
The bank notes that claim denials persist, even though Old Republic stated in its marketing material to lenders and on its Web site that it insured home loans “against default loss for virtually any reason.”
Bank of America says it has paid Old Republic more than $40 million in insurance premiums, and continues to pay more than $870,000 a month for the coverage.
According to Bank of America, Old Republic “had an opportunity to review reasonable loan documentation and the right to choose which loans it would insure prior to and after issuing the policy. It did both often.”
Bank of America says between 2009 and 2010, claims paid by Old Republic under its policy fell by 75 percent. The bank specifically cites $28 million in claims that have been filed and are pending but have not been handled “promptly” by the mortgage insurer, and an additional $31 million in claims that Old Republic said it is “unable to process.”
Old Republic declined to comment on the lawsuit or Bank of America’s allegations.By: Carrie Bay DSNews.com