Bank of America, the largest mortgage lender in the United States, has recently filed a suit against First American Corp, the second largest title insurer in the country. This comes on the heels of another multi-million dollar law suit filed against MGIC Investment Corp., a mortgage insurer that allegedly denied millions of dollars in claims. Bank of America, has filed these law suits in an attempt to stop the hemorrhaging of money that has been lost in the housing crisis.

According to banking analyst, Bert Ely, Bank of America’s “efforts to curb its losses in the mortgage fallout are indicative of what’s going on in the industry”. Paul Muolo, executive editor of National Mortgage News, appears to agree with Ely. Muolo said Fannie Mae and Freddie Mac are asking more lenders to buy back mortgages that were “not made in accordance with their underwriting standards”. In short as everyone scrambles to cover their losses, the blame gets passed from one party to another.

In the case of First American Corp, Bank of America claims the title insurer did not do the necessary background checks of information provided by homeowners. Instead of conducting traditional title searches which would have turned up liens on properties, First American Corp took the homeowners word as to whether or not there were liens on the property in question. The purpose of traditional title searches is “to protect the bank against defective titles on home-equity loans and lines of credit, according to the suit, files March 5 in a North Carolina court”. As a result of not performing traditional title searches, over $500 million in losses have been reported on over 5,000 loans which First American Corp is refusing to cover.

As more and more home owners find themselves in a position where they are defaulting on mortgage loans, it is likely the fighting between lenders and mortgage insurers over who will be responsible for the losses will continue. According to Ely, “if First American didn’t do proper title checks, it could end up on the losing end of the suit”.

According to the lawsuit, First American either denied or ignored most of the claims presented by Bank of America in 2008 and 2009. A spokeswoman for Bank of America, Shirley Norton did not have a comment, however Carrie Gaska, the spokeswoman for First American had this to say in an emailed statement, “First American subsidiaries ‘regrets that their valuable customer, Bank of America, has chosen to file a legal action against the companies’ and ‘we are hopeful that we will be able to resolve this matter outside of court with continued discussions’.”