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MBIA Inc. will get about $1.6 billion as part of a deal to end five years of litigation against Bank of America Corp. and its Countrywide unit over claims of defective securitized mortgage loans, Bloomberg News reported yesterday. As part of the settlement, Bank of America will get warrants for a 5 percent stake in MBIA. MBIA first sued Countrywide in 2008 in New York state Supreme Court in Manhattan for fraud and breach of contract related to securitized home equity loans. Armonk, N.Y.-based MBIA guaranteed payments to investors in the securities. Charlotte, N.C.-based Bank of America acquired Countrywide that year. MBIA claimed that the loans were riskier than represented.

New York Attorney General Eric Schneiderman said that Bank of America Corp. and Wells Fargo & Co. violated terms of a nationwide settlement reached last year over banks’ residential mortgage foreclosure practices, Bloomberg News reported yesterday. The two banks have failed to comply with standards established for processing homeowners’ loan modification applications, Schneiderman said yesterday, and that he plans to sue the banks unless a committee set up to monitor the settlement’s terms takes action. Schneiderman said that delays by the banks in processing mortgage loan modifications have caused New Yorkers to incur fees and fall further behind in payments, putting them at even greater risk of losing their homes.

First-time delinquent home loans fell to 0.84 percent of the 50.2 million mortgages in March, the first month below 1 percent since 2007, before a wave of defaults led to the financial crisis, according to a report today by Lender Processing Services Inc., Bloomberg News reported today. The rate of first-time defaults, defined as loans that went from performing to at least 60 days delinquent, peaked at 2.89 percent in January 2009. Mortgages at least 30 days delinquent or in some stage of foreclosure fell to 5 million in March, down from a peak of 7.7 million in January 2010, according to Lender Processing Services, a real estate information service based in Jacksonville, Fla. That’s still more than double the 2.2 million non-current mortgages of January 2005, when the housing market was rising toward its peak. Tight lending standards have made it harder for borrowers to obtain mortgages, helping drive down default rates while reducing the homeownership rate in the first quarter to 65 percent, the lowest since 1995.

New York Attorney General Eric Schneiderman said he will announce new enforcement actions against major financial institutions as part of his effort to “protect New York homeowners” after calling the first such lawsuit last year a “template” for future litigation, Bloomberg News reported today. In October, Schneiderman sued JPMorgan Chase & Co., alleging that Bear Stearns, which JPMorgan took over in 2008, deceived mortgage-bond investors about defective loans backing securities they bought, leading to “monumental losses.” He said that the case would be a model for future actions against banks that issued mortgage bonds during the real estate boom. He sued Credit Suisse Group AG on similar grounds the next month.

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.

The developer of the Trump Ocean Club International Hotel & Tower in Panama on Tuesday filed for chapter 11 protection with a plan in hand to restructure, the Wall Street Journal reported yesterday. Newland International Properties Corp., a Panama-based company, licenses the Trump name but is not an affiliate of Trump Entertainment Resorts Inc. or Trump Organization LLC. According to court papers, Newland has secured the support of 62 percent of its secured noteholders for a restructuring plan that would repay their $220 million in claims with new notes. Newland has been in default on the notes since November 2011, when it missed an interest and principal payment.

WCI Communities has hired banks for an initial public offering later this year as the formerly bankrupt luxury home builder tries to capitalize on a recovery in the U.S. housing sector, Reuters reported yesterday. The Bonita Springs, Fla.-based company has hired Citigroup Inc. and Credit Suisse to lead the deal. Under chairman Carl Icahn, WCI Communities filed for bankruptcy in August 2008 after being hit hard during the housing downturn and failing to obtain financing. WCI Communities' bankruptcy filing was among the biggest builder bankruptcies, which also included Tousa Inc. and Levitt & Sons. After eliminating $2 billion in debt, WCI emerged from bankruptcy in September 2009 as a private company, with private investment firm Monarch Alternative Capital as its largest shareholder.

The president of a major development firm in South Carolina has filed for bankruptcy protection, the Associated Press reported yesterday. Alan Bruce Kahn filed for chapter 11 protection yesterday noting in court papers that he has fewer than 50 creditors and liability valued between $50 million and $100 million. His assets are estimated between $1 million and $10 million, according to the court papers. Kahn said the financial problems were caused by a drop in property values in recent years.

A panel of top financial regulators is targeting mortgage real-estate investment trusts as a potential risk to the U.S. financial system, the Wall Street Journal reported today. Next week, the Financial Stability Oversight Council, a panel comprising the top U.S. financial regulators, is expected to cite mortgage REITs as a source of market vulnerability in its annual report, a distinction that could set the stage for stricter oversight of the industry. Even though the economy continues to recover slowly, regulators see potential bubbles forming in a range of financial markets, in part because of the Federal Reserve's easy-money policies, which have driven interest rates to near-record lows and prompted investors to seek higher returns elsewhere. Mortgage REITs, which are publicly traded financial companies that borrow funds to invest in real-estate debt, have seen their assets quadruple to more than $400 billion since 2009. They differ from traditional REITs in that they invest in mortgage debt, rather than actual real-estate like office buildings or shopping malls. The firms take advantage of inexpensive, short-term borrowing to buy mortgage securities backed by Fannie Mae and Freddie Mac, and offer returns to investors of as much as 15 percent.

A federal judge has revived a securities fraud lawsuit accusing Bank of America Corp. Chief Executive Brian Moynihan, his predecessor Kenneth Lewis and others of misleading shareholders about the risk that the bank might have to buy back large amounts of soured mortgages, Reuters reported yesterday. U.S. District Judge William Pauley in July had dismissed various claims against the executives by shareholders led by the Pennsylvania Public School Employees' Retirement System while allowing their case against the second-largest U.S. bank to proceed. But Pauley said that the new allegations in an amended lawsuit "plausibly establish fraudulent conduct and a culpable state of mind as to all executive defendants" for allegedly concealing the buyback potential when certifying the bank's financials. He also said that Moynihan could be liable for statements that were inconsistent with a May 13, 2010, letter sent on his behalf to the Financial Crisis Inquiry Commission regarding the bank's securitization practices.