NEW YORK — A state judge has ruled that Countrywide Financial must defend a fraud claim by a unit of MBIA Inc. related to the securitization of billions of dollars in home-equity lines of credit.
In an order, New York State Supreme Court Justice Eileen Bransten in Manhattan also ordered Bank of America to defend "successor and vicarious" liability claims, following its acquisition of Countrywide in 2008. The judge dismissed negligent misrepresentation claims against Countrywide.
A breach of contract claim also is pending.
"This is a procedural ruling and not a ruling on the merits or facts of the case," said Shirley Norton, a Bank of America spokeswoman. "We will continue to vigorously defend against the allegations."
The lawsuit, originally filed against Countrywide in 2008, concerns 15 securitizations of pools of home equity lines of credit. Bank of America was added a defendant last year.
MBIA Insurance Corp. provided billions of dollars in credit enhancements in the form of financial guarantees of the trust obligations on various classes of residential mortgage-backed securities, according to the lawsuit.
The bond insurer has alleged that Countrywide's lending practices between 2004 and 2007 "fundamentally changed" the risk profile of its mortgage loan portfolio.
"We are pleased that the court has allowed our case to move forward against both Countrywide and Bank of America," MBIA said in a statement. "Importantly, the judge recognized the validity of our position that there was a de facto merger between Countywide and Bank of America. MBIA has been substantially harmed by Countrywide and Bank of America and we will continue to pursue all available remedies."
The court order was dated Tuesday and made public Thursday.