Flagstar Bank (FBC), the ninth-largest mortgage lender in the United States, must face trial next month over allegations that it breached contracts for financial guaranty insurance on nearly $1 billion in securities backed by home equity loans.


The case is Assured Guaranty Municipal Corp v Flagstar Bank, FSB in U.S. District Court for the Southern District of New York, No. 11-2375


Troy, Michigan-based Flagstar, which says it has assets of $14.4 billion and is one of the largest savings banks in the United States, settled a civil lawsuit by the U.S. Department of Justice over home loans last February.


Flagstar settled for $132.8 million in damages and penalties, the office of the Manhattan U.S. Attorney said in its announcement. The bank admitted and accepted responsibility for submitting false certifications that misled the U.S. Department of Housing and Urban Development and the Federal Housing Administration.

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