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What: Shares of mortgage insurer MBIA (NYSE: MBI) climbed 10% today after settling its lawsuit against Flagstar Bancorp (NYSE: FBC), in which it accused the bank of misrepresenting the loan quality underlying $1.1 billion in mortgage-backed securities.
So what: Flagstar agreed to pay $110 million in cash to settle the lawsuit, giving MBIA a decent chunk of change to help firm up its balance sheet. In fact, MBIA said it intends to use the cash to repay a portion of its secured loan from National Public Finance Guarantee Corp., giving investors plenty of good vibes over its seemingly improving financial position.
Now what: While today's settlement is certainly good news, MBIA still has plenty of uncertainty surrounding it. "We will continue to focus on resolving our remaining litigation with other parties so that National Public Finance Guarantee Corp., our U.S. muni-only insurer, can resume its role as a leader in the U.S. public finance insurance market," said MBIA CEO Jay Brown. Without a significant settlement from Bank of America , however, several analysts doubt that MBIA will be able to completely pay off the loan balance.
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The article Why MBIA Shares Popped originally appeared on Fool.com.
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