Last year’s Worst Company in America winner, Countrywide Home Loans, has sued AIG for not paying their claim on losses from failed real estate loans that they had insured with the company.
Apparently, Countrywide had paid $342 million in premiums to insure the loans, but AIG still has not compensated them for $43 million in losses.
Why did Countrywide insure the loans? Well, it apparently improved their credit rating — and was just another step in the process that turned garbage loans into fancy securities.
From the LA Times:
Critics complained that Countrywide systematically steered borrowers into loans they could not afford, then bundled the loans and sold them for profit as securities. By insuring the loans, Countrywide was able to improve the ratings it received from rating agencies, making the securities more attractive to mortgage bond investors.