For months Wall Street firms and other secondary market buyers have been in a faceoff with mortgage lenders, returning loans that defaulted early and in the process pushing several originators to, and past, the brink.
Now lenders are finding that mortgage insurers are also pushing back.
National City Corp. said Wednesday in a filing with the Securities and Exchange Commission that an insurer had rejected "a meaningful number of claims filed" on a portfolio of second mortgages for reasons the Cleveland company considered "inappropriate" under their contract. Though it said it would sue the insurer if necessary, National City warned that it may have to add $50 million to reserves.
Several lawyers who represent lenders said such tensions have become more common as parties all along the mortgage food chain seek to minimize damage from mounting losses. At least one insurer has talked openly to investors about its intention to scrutinize contracts more thoroughly, and to deny more claims. Industry observers said such dust-ups are more likely to happen over policies insuring mortgage pools rather than those covering individual loans.
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Related Link : Nat City Kills Loan Sale After Failing to Find Buyer
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