On Friday, October 7, 2022, Ambac Financial Group (“Ambac”) and Bank of America announced a $1.84 billion settlement to resolve all major outstanding RMBS-related litigation between the parties. The announcement came five weeks into a long-awaited trial presided over by Justice Robert Reed of the Manhattan Supreme Court. Ambac, represented by Quinn Emanuel Urquhart and Patterson Belknap Webb & Tyler, alleged Bank of America and Countrywide had breached certain representations and warranties that Ambac had relied upon as the insurer of seventeen Countrywide-sponsored RMBS deals. The settlement also resolved other outstanding disputes related to different RMBS deals that were still awaiting trial.

Coherent Economics’ affiliate, Dr. Michael LaCour-Little, was retained to evaluate Countrywide’s mortgage origination and securitization practices. Dr. LaCour-Little, who has studied the mortgage markets for over thirty years as an academic, as well as professionally in the risk management function of major banks, concluded that Countrywide failed to follow prudent, proper, and customary mortgage origination practices. Dr. LaCour-Little and Coherent Economics Managing Director Prateek Shah worked closely with Mike Carlinsky, Sascha Rand, Toby Futter and Luke Phillips at Quinn Emanuel, and with Muhammad Faridi, Harry Sandick, Jaqueline Bonneau and Michael Fisher at Patterson Belknap.

The settlement represents one of the largest recoveries by a private party in RMBS litigation. Ambac’s stock price closed 15% higher following news of the settlement. Ambac’s announcement of the settlement is available here.