“After Years of Battling, Bank of America and MBIA Settle Mortgage Dispute”

By: Priscilla - May 07th 2013

Justin Sullivan/Getty ImagesA Bank of America branch in San Francisco.

8:29 p.m. | Updated

Bank of America and MBIA, the troubled bond insurer, have reached a $1.7 billion agreement to settle a long-running legal dispute over mortgage-backed securities that became troubled when the financial crisis blossomed.

The deal, which was announced on Monday, provides a lifeline to MBIA, which stood in danger of being unable to meet its obligations in a few weeks’ time. And the agreement will turn Bank of America from bitter foe to equity investor in, and major lender to, the insurer.

The battle between the two financial giants had its beginnings in transactions before the financial crisis between MBIA and two companies — Merrill Lynch andCountrywide Financial — that Bank of America acquired during the crisis.