(Updates with excerpt from ruling in third paragraph.)
March 8 (Bloomberg) --MBIA Inc. lost an appeals court bid to recover from the Federal Deposit Insurance Corp. at least $244 million of claims and expenses stemming from mortgage- backed securities issued by IndyMac Bancorp Inc.
The U.S. Court of Appeals in Washington, upholding a lower court ruling, rejected the insurer’s claims that it should have access to as much as $654 million in funds the FDIC collected from its sale of the failed bank. MBIA argued that pooling and servicing agreements with the IndyMac were approved by the FDIC, thereby giving its claims priority over other creditors.
“Under MBIA’s broad interpretation of ‘approved,’ mere assumption, oral agreement, or partial performance would accord priority status to any damages stemming from a non-repudiated contract,” U.S. Circuit Judge Judith Rogers wrote in today’s opinion.
The case involves IndyMac securitized mortgage loans from 2006 and 2007. MBIA sought to be indemnified for the losses it incurred when borrowers defaulted and investors made claims under their insurance policies because IndyMac deceptions led MBIA into issuing the policies.
After the FDIC took over the failed subprime mortgage lender in 2008, MBIA argued that payments made to investors were “administrative expenses” of the receivership.
Kevin Brown, a spokesman for Armonk, New York-based MBIA, declined to comment on the ruling.
The case is MBIA Insurance Corp. v. Federal Deposit Insurance Corp., 11-05317, U.S. Court of Appeals for the District of Columbia (Washington).
--Editors: Fred Strasser, Glenn Holdcraft