NU Online News Service, May 3, 1:58 p.m.EST

Bond-insurer Ambac has pulled out of a suit against Bank ofAmerica Corp. involving an $8.5 billion mortgage-bondsettlement.

In a letter dated April 30, the insurer, which was once thesecond-largest monoline insurer of bonds, gave no reason for thewithdrawal.

The suit, filed in Supreme Court of the State of New YorkbeforeJudge Barbara Kapnick, is an Article 77 hearing aimed at resolving claims from investors in mortgage bondsissued by Countrywide Financial Corp., which was purchased in 2008by Bank of America.

In an article first reported by Bloomberg, Ambac hadno comment on the withdrawal.

The insurer has been in bankruptcy reorganization since 2010after suffering losses on its book of structured-financialproducts, specifically residential-mortgage-backed securities,during the economic crisis of 2008.

The company's financial-guaranty insurer, Ambac Assuranceestablished a segregated account for those liabilities in 2010 andhas since been under rehabilitation, supervised by the Office ofthe Commissioner of Insurance for the State ofWisconsin.

A federal-bankruptcy judge granted a plan for reorganization to Ambac in March.

In early April, the New York-based insurer filed a suit against JP Morgan Chase Bank, alleging the bank's mortgageunit committed fraud by not following proper underwritingguidelines and by presenting poor-quality risks to thecarrier.