MBIA, the mortgage insurer that decided to back all those subprime securities underwritten by Countrywide and others, will now have its day in court.

A judge ruled earlier this week that MBIA can proceed with its fraud claim against Countrywide (now Bank of America.) The insurer claims Countrywide lied when it told MBIA the mortgages being insured were “in in strict compliance with its underwriting standards and guidelines.”

The court battle should produce some interesting evidence of how Countrywide underwrote thousands of mortgages during the housing boom.  We’re sure to see more example like these from another legal dispute involving the once-giant mortgage originator.

We’re also likely to learn, from Countrywide/BofA’s defense team, how much MBIA really understood about the underwriting process. They are sure to claim the insurer was well-aware of the practices, including no-doc and stated income loans, that were prevalent during the boom.

MBIA’s Fraud Claim Against Insurer Can Proceed [Bloomberg]