Flagstar Bancorp, the holding company for Flagstar Bank (FSB), announced that the bank has entered into an agreement to settle the previously disclosed lawsuit filed by Assured Guaranty Municipal, formerly known as Financial Security Assurance.
The litigation, which was filed in the U.S. District Court for the Southern District of New York, relates to $902.2 million of non-agency securitization transactions in 2005 and 2006 involving home equity line of credit loans (HELOC) that Assured insures.
Under the terms of the settlement agreement, Assured will terminate its pending lawsuit against Flagstar and will not pursue any related claims at any time in the future. In exchange, Flagstar will pay Assured $105.0 million and will assume responsibility for future claims associated with the two HELOC securitization trusts, including the right to receive from Assured all future reimbursements for claims paid to which Assured would have been entitled.
As a result, Flagstar will recognize $48.3 million of income, arising from its deemed receipt of the net fair value of the assets in the two HELOC securitizations and the reversal of its related reserves for pending and threatened litigation.