Bank of America Corp. (NYSE:BAC) lost a key ruling against MBIA Inc. (NYSE:MBI), which granted the latter company court permission to pursue further legal action against it, Bloomberg reported Tuesday. MBIA is attempting to make Bank of America buy back faulty mortgage-backed securities originated by its Countrywide Financial unit.
New York State Supreme Court Justice Eileen Bransten said MBIA need only show that Countrywide made misrepresentations about the loans backing the bonds, instead of having to prove a "direct causal link" between Countrywide's alleged misrepresentations and the losses the insurer is seeking to recover.
"No basis in law exists to mandate that MBIA establish a direct causal link between the misrepresentations allegedly made by Countrywide and claims made under the policy," Bransten wrote.
Shares of MBIA closed up 8.1 percent to $12.53 a share. Bank of America ended up 4.3 percent at $5.80 a share, down from the day's high of $5.89.
The case is MBIA Insurance Corp. v. Countrywide Home Loans Inc., 602825-2008, New York State Supreme Court.