Friday, January 22, 2010

An Update on BofA's Suit Against MGIC's "Rotten Reviews"

This is an update for those interested in following Bank of America's subsidiaries' lawsuit against Mortgage Guaranty Insurance Corporation (MGIC) relating, in large part, to rotten review appraisals. Bank of America filed the lawsuit in San Francisco County Superior Court (i.e., a state court). MGIC's first filing in the case was to remove the case to federal court. Accordingly, for now, the case will be litigated in the United States District Court for the Northern District of California, Case No. C10-0233JL. At the same time, MGIC requested and received an extension of 30 days to respond to Bank of America's complaint. It's quite likely that MGIC may challenge Bank of America's ability to sue in court on the basis that the allegations in the complaint are subject to mandatory arbitration under the parties' insurance contract. Bank of America has tried to avoid that arbitration requirement by positioning its claims as only seeking "declaratory relief" regarding an interpretation of the insurance policy and by not seeking damages for the breaches alleged against MGIC. It would be a shame to see the review appraisal practices employed by mortgage insurers swept away into confidential arbitration. I'm hoping the case stays in court.