MBI - MBIA Inc.

[muscleman]

The $3.2 bn has already been booked in the balance sheet as Insurance loss recoverable, so even if they win, the book value will not increase, right?

 

[JRH]

Some commentary on the reps & warranties action being presided over by Bransten from Christian Herzeca (@cherzeca):

 

http://mbibaclitigtion.blogspot.com/2012/10/bank-of-americas-idiotic-litigation.html

 

Also more-than-slightly relevant to BAC if he is correct regarding a coming NYAG case.

[JRH]

And Frankel:

 

http://newsandinsight.thomsonreuters.com/Legal/News/ViewNews.aspx?id=58521&terms=@ReutersTopicCodes+CONTAINS+'ANV'

[valuecfa]

I liked the way another investor put it (that really seems like BAC's core defense):

 

"BAC's best argument is, MBIA f***ed up. They trusted us!"

-

 

And as how Herzeca recently put it (which i completely agree with as well):

 

"I thought BAC was reckless, basically admitting liability for breach, going all-in on sole remedy argument"

 

the futility of the argument: "how reps & warranties can not be relied upon by sophisticated parties..."

 

and the futility of the argument "if BAC breaches repurchase obligation, there is no judicial recourse."

-

 

These last motions for summary judgement that were recently released really sum up BAC's lack of viable defense in my opinion. They have made me even more confident in the outcome I think is likely. I don't know if the judge would go so far as to decide the case on summary judgement as Frankel is suggesting, but it is a possibility.

 

[JRH]

I do not have sophisticated knowledge of legal arguments or precedents, which is why I have not commented on MBIA/BAC much aside from posting links, but it does not take someone with sophisticated legal knowledge to get the sense that BAC is simply throwing @#^(*$ against the wall to see if anything sticks.

 

I would expect that settlement will occur 1) after there is nothing of consequence left to throw, and 2) before MBIA can produce anything consequentially damaging in court to other BAC cases.

 

I do not pretend - legally - to know whether MBIA HAS anything consequentially damaging to other BAC cases to produce in court.  If it does, we could have settlement.  If not, I don't see what's potentially stopping us from ending up in court for a very long time.

[muscleman]

I liked the way another investor put it (that really seems like BAC's core defense):

 

"BAC's best argument is, MBIA f***ed up. They trusted us!"

-

 

And as how Herzeca recently put it (which i completely agree with as well):

 

"I thought BAC was reckless, basically admitting liability for breach, going all-in on sole remedy argument"

 

the futility of the argument: "how reps & warranties can not be relied upon by sophisticated parties..."

 

and the futility of the argument "if BAC breaches repurchase obligation, there is no judicial recourse."

-

 

These last motions for summary judgement that were recently released really sum up BAC's lack of viable defense in my opinion. They have made me even more confident in the outcome I think is likely. I don't know if the judge would go so far as to decide the case on summary judgement as Frankel is suggesting, but it is a possibility.

 

My primary confusion here is that MBI has already booked that 3.2 bn expected recovery into the book value, so even if it wins the case, the book value will not further increase?

[QLEAP]

I liked the way another investor put it (that really seems like BAC's core defense):

 

"BAC's best argument is, MBIA f***ed up. They trusted us!"

-

 

And as how Herzeca recently put it (which i completely agree with as well):

 

"I thought BAC was reckless, basically admitting liability for breach, going all-in on sole remedy argument"

 

the futility of the argument: "how reps & warranties can not be relied upon by sophisticated parties..."

 

and the futility of the argument "if BAC breaches repurchase obligation, there is no judicial recourse."

-

 

These last motions for summary judgement that were recently released really sum up BAC's lack of viable defense in my opinion. They have made me even more confident in the outcome I think is likely. I don't know if the judge would go so far as to decide the case on summary judgement as Frankel is suggesting, but it is a possibility.

 

My primary confusion here is that MBI has already booked that 3.2 bn expected recovery into the book value, so even if it wins the case, the book value will not further increase?

 

Yes but currently it is trading at ~half BV.  Perhaps this old presentation from Manal Mehta will make the thesis clear.

70925908-MBIA-Overview-July-2-2010.pdf

[valuecfa]

A trial worth keeping an eye on :

 

Flagstar Bancorp Inc. will go on trial Oct. 9 in a lawsuit seeking at least $82.4 million in damages, after the written opinion Tuesday by Judge Jed Rakoff of the U.S. District Court in New York.

 

The suit was filed by New York City-based Assured Guaranty Municipal Corp. alleging that Flagstar breached contracts insuring nearly $1 billion in securities backed by home equity loans in 2005 and 2006.

 

In February, Rakoff denied a Flagstar motion for a summary judgment.

 

During a September 5 insurance industry conference hosted by brokerage firm Keefe, Bruyette & Woods, Assured Chief Executive Dominic Frederico referred to the potential impact of a "big win" in the Flagstar case.

 

The other defendants "will all of a sudden get really interested in getting a settlement achieved," he said.

[muscleman]

A trial worth keeping an eye on :

 

Flagstar Bancorp Inc. will go on trial Oct. 9 in a lawsuit seeking at least $82.4 million in damages, after the written opinion Tuesday by Judge Jed Rakoff of the U.S. District Court in New York.

 

The suit was filed by New York City-based Assured Guaranty Municipal Corp. alleging that Flagstar breached contracts insuring nearly $1 billion in securities backed by home equity loans in 2005 and 2006.

 

In February, Rakoff denied a Flagstar motion for a summary judgment.

 

During a September 5 insurance industry conference hosted by brokerage firm Keefe, Bruyette & Woods, Assured Chief Executive Dominic Frederico referred to the potential impact of a "big win" in the Flagstar case.

 

The other defendants "will all of a sudden get really interested in getting a settlement achieved," he said.

 

 

Thank you! So normally when they go to trial, how long will the trial last? Just a few days?

I am confused why AGO is able to move through the trials much faster than MBI.

[muscleman]

I liked the way another investor put it (that really seems like BAC's core defense):

 

"BAC's best argument is, MBIA f***ed up. They trusted us!"

-

 

And as how Herzeca recently put it (which i completely agree with as well):

 

"I thought BAC was reckless, basically admitting liability for breach, going all-in on sole remedy argument"

 

the futility of the argument: "how reps & warranties can not be relied upon by sophisticated parties..."

 

and the futility of the argument "if BAC breaches repurchase obligation, there is no judicial recourse."

-

 

These last motions for summary judgement that were recently released really sum up BAC's lack of viable defense in my opinion. They have made me even more confident in the outcome I think is likely. I don't know if the judge would go so far as to decide the case on summary judgement as Frankel is suggesting, but it is a possibility.

 

My primary confusion here is that MBI has already booked that 3.2 bn expected recovery into the book value, so even if it wins the case, the book value will not further increase?

 

Yes but currently it is trading at ~half BV.  Perhaps this old presentation from Manal Mehta will make the thesis clear.

 

But hasn't AGO already won most of the cases but still trade at half BV? I mean, I am not saying that MBI is not a good investment. I am just wondering if the trial will bring immediate impact on MBI's share price, thus call option opportunities.

[mpauls]

I liked the way another investor put it (that really seems like BAC's core defense):

 

"BAC's best argument is, MBIA f***ed up. They trusted us!"

-

 

And as how Herzeca recently put it (which i completely agree with as well):

 

"I thought BAC was reckless, basically admitting liability for breach, going all-in on sole remedy argument"

 

the futility of the argument: "how reps & warranties can not be relied upon by sophisticated parties..."

 

and the futility of the argument "if BAC breaches repurchase obligation, there is no judicial recourse."

-

 

These last motions for summary judgement that were recently released really sum up BAC's lack of viable defense in my opinion. They have made me even more confident in the outcome I think is likely. I don't know if the judge would go so far as to decide the case on summary judgement as Frankel is suggesting, but it is a possibility.

 

My primary confusion here is that MBI has already booked that 3.2 bn expected recovery into the book value, so even if it wins the case, the book value will not further increase?

 

Yes but currently it is trading at ~half BV.  Perhaps this old presentation from Manal Mehta will make the thesis clear.

 

But hasn't AGO already won most of the cases but still trade at half BV? I mean, I am not saying that MBI is not a good investment. I am just wondering if the trial will bring immediate impact on MBI's share price, thus call option opportunities.

 

 

AGO is a very different company with very different liabilities, assets, etc. 

 

Also, there are components to equity that don't show up in stated book value such as, the contingency reserve (which has decreased-some of which was effectively used to finance some of Structured Finance's commutations, but which should flow back to National soon).  Finally, there may well be something of value left in structured depending on what happens with the BAC settlement.  Ultimately, there will be additional value in excess of book value when National resumes writing new business. 

[muscleman]

I liked the way another investor put it (that really seems like BAC's core defense):

 

"BAC's best argument is, MBIA f***ed up. They trusted us!"

-

 

And as how Herzeca recently put it (which i completely agree with as well):

 

"I thought BAC was reckless, basically admitting liability for breach, going all-in on sole remedy argument"

 

the futility of the argument: "how reps & warranties can not be relied upon by sophisticated parties..."

 

and the futility of the argument "if BAC breaches repurchase obligation, there is no judicial recourse."

-

 

These last motions for summary judgement that were recently released really sum up BAC's lack of viable defense in my opinion. They have made me even more confident in the outcome I think is likely. I don't know if the judge would go so far as to decide the case on summary judgement as Frankel is suggesting, but it is a possibility.

 

My primary confusion here is that MBI has already booked that 3.2 bn expected recovery into the book value, so even if it wins the case, the book value will not further increase?

 

Yes but currently it is trading at ~half BV.  Perhaps this old presentation from Manal Mehta will make the thesis clear.

 

But hasn't AGO already won most of the cases but still trade at half BV? I mean, I am not saying that MBI is not a good investment. I am just wondering if the trial will bring immediate impact on MBI's share price, thus call option opportunities.

 

 

AGO is a very different company with very different liabilities, assets, etc. 

 

Also, there are components to equity that don't show up in stated book value such as, the contingency reserve (which has decreased-some of which was effectively used to finance some of Structured Finance's commutations, but which should flow back to National soon).  Finally, there may well be something of value left in structured depending on what happens with the BAC settlement.  Ultimately, there will be additional value in excess of book value when National resumes writing new business.

 

Thank you. I am new to MBI and AGO and still try to understand as much as possible.

I am comparing the current price to their adjusted book value. Both seem to be trading at 1/3 of the adjusted book, but AGO has removed most of the uncertainties from legal issues.

 

AGO is already writing new muni insurance policies, no? We still don't know yet when MBI will be able to do so.

[Kiltacular]

Couple of new posts from Herzeca's excellent blog:

 

10/12:

http://mbibaclitigtion.blogspot.com/2012/10/did-bank-of-america-asset-strip.html

 

10/15:

http://mbibaclitigtion.blogspot.com/2012/10/a-mediators-perspective-on-mbia-v-bank.html#more

 

Hat Tip to "mpauls"   

[QLEAP]

 

AGO  vs Credit Suisse

 

http://mobile.reuters.com/article/idUSL1E8LG0N020121016?irpc=43

 

 

 

 

 

[muscleman]

Couple of new posts from Herzeca's excellent blog:

 

10/12:

http://mbibaclitigtion.blogspot.com/2012/10/did-bank-of-america-asset-strip.html

 

10/15:

http://mbibaclitigtion.blogspot.com/2012/10/a-mediators-perspective-on-mbia-v-bank.html#more

 

Hat Tip to "mpauls" 

 

What is the amount that MBI asked BAC for?

In the SEC filings, it says 2.3 Billion but that is based on weighted probabilistic scenario.

[Aberhound]

In Canada if you transfer out an asset from a company to harm a creditor there is a low threshold for proving a fraudulent conveyance. There was a case where a major law firm in Vancouver helped a company transfer out assets leaving tax losses so the entity could be used for a new venture which failed. The court had no difficulty in allowing the creditors of the failed new venture to go after the assets which were transferred out. The court said if a new corporation had been created for the new venture all would have been well.

 

So BAC transferred out the mortgage platform from Countrywide they say for fair value which left no business to pay the contingent liabilities. Under Canadian law MBIA would have no problem going after the profits of the mortgage platform which was transferred out. Under Canadian law BAC could have avoided the potential liability by buying the assets of Countrywide for fair value at the time and leaving the entity to fail.

 

If WFC's massive increase in mortgage servicing revenues is an indication MBIA in Canada would have no problem with successor liability. I await with interest to see if the result in the US is that same as Canada as both systems are based on the common law of England.

[JRH]

"Employees asked Moynihan when legal expenses from the takeovers of Merrill Lynch and Countrywide will subside. Disputes with Fannie Mae and MBIA Inc. over who should bear the costs of defective mortgages may be settled if the firms are reasonable in their demands, the CEO said."

 

Possible MBIA - more than BAC - is the party more apt to exploit situational or timing factors in the negotiations?

 

http://mobile.bloomberg.com/news/2012-10-23/bofa-ceo-moynihan-declares-victory-over-capital-doubters.html

[valuecfa]

In the AGO vs Flagstar trial, an amusing loan came up for review:

 

Rakoff was fixated on one of the loans underlying the Flagstar mortgage-backed securities that Assured insured, in which the borrower -- a Detroit police officer -- claimed to be the president of a mortgage brokerage. The judge was so disturbed by the loan-level details that emerged Monday that he twice mused whether to refer the matter to prosecutors in Michigan. It made for great theater, as you'll see below....

 

The cop claimed to be the president of the very same company that issued the mortgage. (Flagstar subsequently acquired the loan for securitization.) Buchdahl's implication, which Rakoff immediately detected, was that the cop and the loan officer who authorized his mortgage had conspired to misrepresent the police officer's qualifications.

 

http://newsandinsight.thomsonreuters.com/New_York/News/2012/10_-_October/Assured_trial__Loan_file_fraud_fireworks_mask_key_sampling_issue/

[muscleman]

In the AGO vs Flagstar trial, an amusing loan came up for review:

 

Rakoff was fixated on one of the loans underlying the Flagstar mortgage-backed securities that Assured insured, in which the borrower -- a Detroit police officer -- claimed to be the president of a mortgage brokerage. The judge was so disturbed by the loan-level details that emerged Monday that he twice mused whether to refer the matter to prosecutors in Michigan. It made for great theater, as you'll see below....

 

The cop claimed to be the president of the very same company that issued the mortgage. (Flagstar subsequently acquired the loan for securitization.) Buchdahl's implication, which Rakoff immediately detected, was that the cop and the loan officer who authorized his mortgage had conspired to misrepresent the police officer's qualifications.

 

http://newsandinsight.thomsonreuters.com/New_York/News/2012/10_-_October/Assured_trial__Loan_file_fraud_fireworks_mask_key_sampling_issue/

 

This is very funny!  ;D

 

I am eager to see the result this weekend!

[muscleman]

Anyone can give an estimate on the Article 78 result? We have been waiting for conclusion since the hearing is done in June. ;D

If BAC loses, it can appeal, and the litigation will drag on and on until a globa settlement is reached for all the cases?

[valuecfa]

Anyone can give an estimate on the Article 78 result? We have been waiting for conclusion since the hearing is done in June. ;D

If BAC loses, it can appeal, and the litigation will drag on and on until a globa settlement is reached for all the cases?

 

It appears the judge is doing mbia a favor by buying them time to ensure an appeal ruling would come after the reps & warranties trial. Timing can be critical in this matter. That being the case, nobody knows when the judge will give her decision.

 

While a settlement can happen at any minute, yes... BAC can and will appeal if mbia wins the decision on the company's split. A global settlement seems likely, but who knows when. The successor liability decision will be coming down the pipe shortly, and who knows if the case will be decided before trial.

[muscleman]

Anyone can give an estimate on the Article 78 result? We have been waiting for conclusion since the hearing is done in June. ;D

If BAC loses, it can appeal, and the litigation will drag on and on until a globa settlement is reached for all the cases?

 

It appears the judge is doing mbia a favor by buying them time to ensure an appeal ruling would come after the reps & warranties trial. Timing can be critical in this matter. That being the case, nobody knows when the judge will give her decision.

 

While a settlement can happen at any minute, yes... BAC can and will appeal if mbia wins the decision on the company's split. A global settlement seems likely, but who knows when. The successor liability decision will be coming down the pipe shortly, and who knows if the case will be decided before trial.

 

 

Thanks!

I am searching for the trial outcome between AGO and FlagStar. It is supposed to come out this week, but I still haven't seen it yet. It may be a catalyst for MBI's settlement with BAC as well.

 

So if MBIA needs more time, it means that we may not see the result until much later, maybe early 2013? Then BAC will appeal and this case will go on for another few years?

[PlanMaestro]

Can some MBIA expert comment today's announcement?

 

http://www.4-traders.com/MBIA-INC-13464/news/MBIA-Inc-Announces-Consent-Solicitation-Relating-to-the-Indentures-Governing-Its-6-40-Senior-Not-15478610/

[muscleman]

Can some MBIA expert comment today's announcement?

 

http://www.4-traders.com/MBIA-INC-13464/news/MBIA-Inc-Announces-Consent-Solicitation-Relating-to-the-Indentures-Governing-Its-6-40-Senior-Not-15478610/

 

hmm.. I am confused. What benefits does this bring to MBIA shareholders?

[valuecfa]

Can some MBIA expert comment today's announcement?

 

http://www.4-traders.com/MBIA-INC-13464/news/MBIA-Inc-Announces-Consent-Solicitation-Relating-to-the-Indentures-Governing-Its-6-40-Senior-Not-15478610/

 

hmm.. I am confused. What benefits does this bring to MBIA shareholders?

 

Plenty. Question is what does it do for the note holders. At work and don't have time at the moment to read all material