According to Ambac, the Countrywide department within BofA did not adhere to underwriting rules or provide accurate data on the quality of the loans offered as part of the deal.
In the complaint, the firm alleged that 97 per cent of 6,533 loans did not conform to underwriting guidelines.
Ambac claimed that out of the $16.7 billion worth of securities, $2 billion either defaulted or were written off leaving the company to pay an estimated $466 million on claims.
Alan White, a law professor at Valparaiso University, who was quoted by Reuters, said: âBofA probably didnât settle because they didnât want to swallow the amount of money that itâs going to take to satisfy Ambac. Nobody wants to be left holding the bag."
The complaint alleged that the Countrywide division failed to meet its obligations and repurchase some of the defaulted loans.
Ambacâs claim has been made on 12 pools of home loans set up by Countrywide between 2004 and 2006.
By Jim Ottewill