(Reuters) – Shares of bond insurer MBIA Inc rose as much as 7 percent on Friday as investors bet that a new investigation into Bank of America Inc's mortgage practices would pressure the bank to settle a $5 billion lawsuit with the company.
Bank of America said in securities filing on Thursday that New York State Attorney General Eric Schneiderman was investigating the bank over the purchase, securitization and underwriting of home loans by Countrywide Financial, which the bank bought in 2008.
MBIA claims that Bank of America is responsible for the writing of dodgy mortgages by Countrywide that were packaged into bonds that MBIA had insured.
MBIA was stuck with huge losses when the loans went bad and now wants the bank to buy back the mortgages.
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