MBI - MBIA Inc.

[valuecfa]

Any idea whats causing the latest down drift.

 

I suspect the recent weakness is due to the decision in the case of Ambac Assurance Corp. v. DLJ Mortgage Capital, Inc., No. 600070/10.

 

http://amlawdaily.typepad.com/04112011creditsuisse_letter.pdf

 

 

[Rabbitisrich]

ValueCfa, how do you keep track with all these legal developments? I have google alerts set up for MBI and its subsidiaries but I didn't catch this letter.

[valuecfa]

ValueCfa, how do you keep track with all these legal developments? I have google alerts set up for MBI and its subsidiaries but I didn't catch this letter.

 

The various courts have electronic databases.

[alertmeipp]

AGO settles with BAC with a nice price tag.

 

[Aberhound]

Here are the terms of the BOA-AG settlement:

 

HAMILTON, Bermuda, Apr 15, 2011 (BUSINESS WIRE) --

 

Assured Guaranty Ltd. (NYSE: AGO) ("AGL" and, together with its subsidiaries, "Assured Guaranty" or the "Company") announced today that it has reached a comprehensive settlement with Bank of America Corporation and its subsidiaries (collectively, "Bank of America"), including Countrywide Financial Corporation and its subsidiaries (collectively, "Countrywide"), regarding their liabilities with respect to 29 residential mortgage-backed securities ("RMBS") transactions insured by Assured Guaranty, including claims relating to reimbursement for breaches of representations and warranties ("R&W") and historical loan servicing issues.

 

The settlement agreement includes a payment of $1.1 billion to Assured Guaranty as well as a loss-sharing reinsurance arrangement on 21 first lien RMBS transactions. The settlement covers all Bank of America or Countrywide-sponsored securitizations, as well as certain other securitizations containing concentrations of Countrywide-originated loans, that Assured Guaranty has insured on a primary basis. The settled transactions have a gross par outstanding of $5.2 billion ($4.8 billion net par outstanding) as of December 31, 2010, or 29% of Assured Guaranty's total below investment grade RMBS net par outstanding, and consists of 8 second lien securitizations and 21 first lien securitizations.

 

"We are pleased to have reached a settlement with Bank of America that puts this legacy issue behind both of us," said Dominic Frederico, President and Chief Executive Officer. "This settlement significantly strengthens our balance sheet, allowing us to more effectively assist municipal issuers. We hope that this settlement--negotiated outside of litigation--encourages other R&W providers including JPMorgan Chase, Deutsche Bank and Flagstar Bank to accelerate the R&W claims settlement process."

 

The cash settlement of $1.1 billion will be paid in full by March 31, 2012. The initial payment of $850 million was paid on April 14, 2011. In addition, Bank of America and Countrywide have agreed to a reinsurance arrangement that will reimburse Assured Guaranty for 80% of all paid losses on the 21 first lien RMBS transactions until aggregate collateral losses in those transactions exceed $6.6 billion. Cumulative collateral losses on these transactions were approximately $1.3 billion with no paid losses by Assured Guaranty as of December 31, 2010. As of December 31, 2010, Assured Guaranty's gross economic loss on these RMBS transactions, which assumes cumulative projected collateral losses of $4.6 billion, was $490 million. The total estimated value of the settlement is expected to be accretive to shareholders' equity and adjusted book value, a non-GAAP financial measure.

[txlaw]

The cash settlement of $1.1 billion will be paid in full by March 31, 2012. The initial payment of $850 million was paid on April 14, 2011. In addition, Bank of America and Countrywide have agreed to a reinsurance arrangement that will reimburse Assured Guaranty for 80% of all paid losses on the 21 first lien RMBS transactions until aggregate collateral losses in those transactions exceed $6.6 billion. Cumulative collateral losses on these transactions were approximately $1.3 billion with no paid losses by Assured Guaranty as of December 31, 2010. As of December 31, 2010, Assured Guaranty's gross economic loss on these RMBS transactions, which assumes cumulative projected collateral losses of $4.6 billion, was $490 million. The total estimated value of the settlement is expected to be accretive to shareholders' equity and adjusted book value, a non-GAAP financial measure.

 

80% of all paid losses on those RMBS transactions to be paid by BofA.  Very interesting, indeed. :)

[valuecfa]

The cash settlement of $1.1 billion will be paid in full by March 31, 2012. The initial payment of $850 million was paid on April 14, 2011. In addition, Bank of America and Countrywide have agreed to a reinsurance arrangement that will reimburse Assured Guaranty for 80% of all paid losses on the 21 first lien RMBS transactions until aggregate collateral losses in those transactions exceed $6.6 billion. Cumulative collateral losses on these transactions were approximately $1.3 billion with no paid losses by Assured Guaranty as of December 31, 2010. As of December 31, 2010, Assured Guaranty's gross economic loss on these RMBS transactions, which assumes cumulative projected collateral losses of $4.6 billion, was $490 million. The total estimated value of the settlement is expected to be accretive to shareholders' equity and adjusted book value, a non-GAAP financial measure.

 

80% of all paid losses on those RMBS transactions to be paid by BofA.  Very interesting, indeed. :)

 

It was a good settlement and will be accretive to ABV, as well as BV.

[jegenolf]

The cash settlement of $1.1 billion will be paid in full by March 31, 2012. The initial payment of $850 million was paid on April 14, 2011. In addition, Bank of America and Countrywide have agreed to a reinsurance arrangement that will reimburse Assured Guaranty for 80% of all paid losses on the 21 first lien RMBS transactions until aggregate collateral losses in those transactions exceed $6.6 billion. Cumulative collateral losses on these transactions were approximately $1.3 billion with no paid losses by Assured Guaranty as of December 31, 2010. As of December 31, 2010, Assured Guaranty's gross economic loss on these RMBS transactions, which assumes cumulative projected collateral losses of $4.6 billion, was $490 million. The total estimated value of the settlement is expected to be accretive to shareholders' equity and adjusted book value, a non-GAAP financial measure.

 

80% of all paid losses on those RMBS transactions to be paid by BofA.  Very interesting, indeed. :)

 

It was a good settlement and will be accretive to ABV, as well as BV.

 

You don't seem ecstatic. This seems like a great settlement... Were you hoping for more?

[valuecfa]

The cash settlement of $1.1 billion will be paid in full by March 31, 2012. The initial payment of $850 million was paid on April 14, 2011. In addition, Bank of America and Countrywide have agreed to a reinsurance arrangement that will reimburse Assured Guaranty for 80% of all paid losses on the 21 first lien RMBS transactions until aggregate collateral losses in those transactions exceed $6.6 billion. Cumulative collateral losses on these transactions were approximately $1.3 billion with no paid losses by Assured Guaranty as of December 31, 2010. As of December 31, 2010, Assured Guaranty's gross economic loss on these RMBS transactions, which assumes cumulative projected collateral losses of $4.6 billion, was $490 million. The total estimated value of the settlement is expected to be accretive to shareholders' equity and adjusted book value, a non-GAAP financial measure.

 

80% of all paid losses on those RMBS transactions to be paid by BofA.  Very interesting, indeed. :)

 

It was a good settlement and will be accretive to ABV, as well as BV.

 

You don't seem ecstatic. This seems like a great settlement... Were you hoping for more?

 

 

lol

 

I'm extremely pleased with the settlement.  ;D :D ;D

 

Difficult to show emotion through the message board i guess. Terrific day! AGO still has several more cases I'd like to see get settled, before i start doing more cartwheels, but this was a big one.

[jegenolf]

The cash settlement of $1.1 billion will be paid in full by March 31, 2012. The initial payment of $850 million was paid on April 14, 2011. In addition, Bank of America and Countrywide have agreed to a reinsurance arrangement that will reimburse Assured Guaranty for 80% of all paid losses on the 21 first lien RMBS transactions until aggregate collateral losses in those transactions exceed $6.6 billion. Cumulative collateral losses on these transactions were approximately $1.3 billion with no paid losses by Assured Guaranty as of December 31, 2010. As of December 31, 2010, Assured Guaranty's gross economic loss on these RMBS transactions, which assumes cumulative projected collateral losses of $4.6 billion, was $490 million. The total estimated value of the settlement is expected to be accretive to shareholders' equity and adjusted book value, a non-GAAP financial measure.

 

80% of all paid losses on those RMBS transactions to be paid by BofA.  Very interesting, indeed. :)

 

It was a good settlement and will be accretive to ABV, as well as BV.

 

You don't seem ecstatic. This seems like a great settlement... Were you hoping for more?

 

 

lol

 

I'm extremely pleased with the settlement.   ;D :D ;D

 

Difficult to show emotion through the message board i guess. Terrific day! AGO still has several more cases I'd like to see get settled, before i start doing more cartwheels, but this was a big one.

 

It's a darn good precedent to set though!

 

Congrats on today with hopefully more days like it to come... And thank you for your research.

[valuecfa]

It is funny though. Before i got the slightest bit of enjoyment from a decent rise in MBI & AGO share price this morning, my very first thought was- I wonder what effect, if any, this will have on the S&P proposal (on bond insurer ratings criteria) in regards to including the reps & warranties.

[valuecfa]

Any idea whats causing the latest down drift.

 

Seems the main contributor to the prior downdraft was that the New York Supreme Court was hearing a request from the NY insurance department to delay the Article 78 case for 7 months, to "respond to the banks' extraordinary voluminous reply papers."

 

MBIA does not itself request an extension, but MBIA says it does not oppose the request, so that the NYID has the time and discovery necessary to properly respond.

[Myth465]

This is a tough one for me to handy cap. It seems to hinge on court cases and legalize for most of the upside. I understand the basic argument, but dont feel comfortable handicapping it as a layman.

 

I figure if the government approved the split, it will stand, and the banks should pick up some of the losses due to their involvement in the process. Who knows what will happen, I will probably wait for this uptick to pass and just buy a small leap position based on these 2 quotes.

 

 

Charlie Munger - We look for a horse with one chance in two of winning and which pays you three to one.

 

Charlie Munger - You’re looking for a mispriced gamble. That’s what investing is. And you have to know enough to know whether the gamble is mispriced. That’s value investing.

 

[valuecfa]

This is a tough one for me to handy cap. It seems to hinge on court cases and legalize for most of the upside. I understand the basic argument, but dont feel comfortable handicapping it as a layman.

 

I figure if the government approved the split, it will stand, and the banks should pick up some of the losses due to their involvement in the process. Who knows what will happen, I will probably wait for this uptick to pass and just buy a small leap position based on these 2 quotes.

 

 

Charlie Munger - We look for a horse with one chance in two of winning and which pays you three to one.

 

Charlie Munger - You’re looking for a mispriced gamble. That’s what investing is. And you have to know enough to know whether the gamble is mispriced. That’s value investing.

 

 

My investigating leaves me to believe the reps & warranty cases (breach of contract claim) will be upheld in MBIA's favor. MBIA's fraud claims will be much more difficult to prove, but they may get one or two of them upheld in their favor. It is just very difficult to prove fraud in this matter. . As for the transformation, more dirt (or i should say alleged dirt), in favor of the banks has been revealed in discovery since i began this position in late December. I still expect the NYID to prevail, yet it is not the slam dunk it seemed to be prior to discovery, in my opinion. I am eagerly awaiting the NYID's response to the allegations and affidavits.

[Aberhound]

I read the arguments for and against the s. 78. What I thought was missing from the opposing arguments is that the decision is exactly the type of decisions that governments should make to avoid a market failure. Yes splitting the company potentially harms those who had insurance on the structured finance side and helps those with insurance on the muni finance side. But because of the split new resources are brought into the muni finance side from new business and the consumers on that side benefit from more competition. These new resources help the structured finance side because the profits flow to the holding company which better pays the holdco debts and builds capital and helps put Holdco in a position to raise more capital. Further, the structured finance side is basically a big litigation battle because of the warrants and reps and fraud battle with the banks some of who are also customers. The structured finance side is therefore a battle between the customers who want the structured side to win the litigation and the defendants who want to starve the structured finance side to make settlement easier and cheaper. If the government duty is to protect consumers the split is therefore beneficial to consumers on both sides (other than the guilty). A pareto optimum result is one that makes no one worse off. That can be achieved with the split by ordering Holdco or Muni finance side over time to pay what was lost to the structured side because of the split. That amount is small or may be negative because of the extra resources flowing to Holdco help pay for the litigation which results in more resources on the structured side. Disallowing the split is not a pareto optimum solution because the muni side consumers are clearly worse off and the structured side innocent customers are probably worse off depending on the outcome of the litigation and the amount and profitability of new business on the muni side. The court would have the inherent jurisdiciton to allow the split but make it conditional on some payment to the structured side to achieve a pareto optimum solution.

 

Long MBI including 2013 leaps

[txlaw]

Fairholme just filed their Form N-Q.

 

Interestingly, the single largest holding in the Fairholme Allocation Fund is MBIA, which makes up 13% of the portfolio.

 

 

 

[Kiltacular]

Anyone still following this story?  I thought Berkowitz might discuss it more on his conf. call but I didn't hear him say much.

[valuecfa]

Anyone still following this story?  I thought Berkowitz might discuss it more on his conf. call but I didn't hear him say much.

 

Yes. Still following the company. There hasn't been too much new info to report from the courts yet.

[shalab]

Any opinions on Q1 where tangible book value declined?

 

[valuecfa]

Any opinions on Q1 where tangible book value declined?

 

 

Tangible book value fluctuated with the unrealized losses in the structured finance division for the Q, and MBIA's own credit worthiness. I'd keep an eye on the company's write downs, which have been pretty hefty YTD. Commercial real estate still hasn't turned yet, hurting the SF division. --Typically, in accounting for insurance companies, the company sets reserve amounts for losses, and that is what is factored into GAAP book, and the investor has to factor in whether or not those reserves are accurate/realistic. MBIA has done this too for its insurance policies in its structured finance division (as well as municipal finance) but it is not factored into GAAP book...the unrealized losses/gains are, that is why the company stresses to look at its reserves factored into ABV.

[Kiltacular]

value,

 

Thanks for the update and your work to date.

[Rabbitisrich]

http://www.nytimes.com/2011/05/17/business/17bank.html?_r=1

 

Officials in Eric T. Schneiderman’s office have also requested meetings with representatives from Bank of America, Goldman Sachs and Morgan Stanley, according to people briefed on the matter who were not authorized to speak publicly. The inquiry appears to be quite broad, with the attorney general’s requests for information covering many aspects of the banks’ loan pooling operations. They bundled thousands of home loans into securities that were then sold to investors such as pension funds, mutual funds and insurance companies.

[valuecfa]

value,

 

Thanks for the update and your work to date.

 

I just wanted to give a heads up that i won't be able to research/update things as often as i'd like on this investment. I've shifted careers a few weeks ago and my new one leaves me little free time at work to read the necessary court filings,etc. and update them in any great detail here on the day of release. I'll try to update with a few quips every now and again, when i (myself), get to catch up on researching the company in more depth, on the weekends. I hate that i will have this huge lag in researching companies nowadays, but it's a fun job!

[S2S]

^ Congratulations! Is the new gig similar to your last one(sell-side research if memory serves)?

 

And again, thanks for your work on MBIA. I learned a lot from your posts.

[valuecfa]

^ Congratulations! Is the new gig similar to your last one(sell-side research if memory serves)?

 

And again, thanks for your work on MBIA. I learned a lot from your posts.

 

Thank you, i appreciate it. I'm really looking forward to my new position. I'm the new chief investment officer for a trust company, the largest one in my state...but you've probably never heard of it if you live outside of my state.