Flagstar Bancorp Inc. said on Thursday that it would pay $110 million to settle a lawsuit by MBIA Inc. accusing the bank of misrepresenting the quality of loans underlying $1.1 billion in mortgage-backed securities, Reuters reported on Friday. MBIA filed the lawsuit in January in the latest legal spat between bond insurers and banks that packaged mortgage financial products at the center of the 2008 financial crisis. Armonk, N.Y.-based MBIA in the lawsuit said that it had agreed to insure two mortgage-backed transactions by Flagstar in 2006 and 2007. But mortgage defaults mounted, resulting in MBIA paying out $165 million, the lawsuit said.
