Tensions Escalate As Mortgage Insurers Stiff Lenders On Policy Claims On Defaulted Home Loans Allegedly Originated Through Fraud

In San Francsico, California, Insurance Networking News reports:

• Bank of America Corp.'s lawsuit against MGIC Investment Corp. reflects escalating tensions in the industry over mortgage insurers' denials of claims that lenders submit for defaulted home loans. In a complaint filed in the Superior Court of California for San Francisco, B of A alleged that MGIC is denying "millions of dollars in valid mortgage insurance claims" the lender has submitted. A spokeswoman for B of A would not elaborate on the dollar amount of claims in dispute.

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• B of A alleged that MGIC "has adopted unreasonable interpretations of its mortgage insurance policy language to justify its failure to pay claims" because of steep losses during the downturn. The Charlotte banking company asked the court to determine the appropriate interpretation of terms of its policies with MGIC. Among other things, B of A said, MGIC has improperly taken the position that the lender must prove it was not aware of an alleged borrower misrepresentation to avoid rescission of a policy.

For more, see B of A Suit Against Mortgage Insurer Shows Growing Rift.