AIG Sues Countrywide: [Insert Headline Here]

I’ll let readers come up with the right headline for this one, but seeing news tonight that an AIG unit is suing Countrywide is one of the more blackly amusing moments in this never-ending crisis. Two of the kingpins of the crisis are now suing each other for misrepresentations? The mind boggles.

“As a result of the unprecedented number of defaults in the mortgage loans, United Guaranty has already paid out insurance claims totaling over $30 million and is exposed to additional claims of several hundred million dollars more,” AIG’s United Guaranty Mortgage Indemnity Co. said today in a complaint filed in federal court in Los Angeles.

Countrywide, bought last year by Bank of America Corp., sought insurance for the subprime mortgage loans to increase the credit ratings of mortgage-backed securities in which the loans were bundled, according to the complaint. Countrywide falsely claimed the loans were originated in strict compliance with its underwriting standards, the AIG unit said.

United Guaranty said in the complaint that it had reviewed loan files that showed that most mortgages covered by 11 policies for asset-backed securities were either underwritten in violation of Countrywide’s own guidelines or contained defects, such as missing documents, misrepresented credit scores or false social security numbers.

Okay, okay, United Guaranty isn’t AIGFP, but still. More here.

Originally published at Paul Kedrosky’s blog and reproduced here with the author’s permission.