MBIA Insurance Corp. earlier this week sued Residential Funding Co., saying RFC "induced" it into backing five transactions by misrepresenting the quality of more than $3 billion of home equity loans included in the securitizations.

MBIA has already paid out $248 million on policies it would not have insured had it known their true quality, it said in the lawsuit filed in U.S. District Court for the Southern District of New York. MBIA - one of the many bond insurers hit by its exposure to the deteriorating U.S. housing market - last month filed a similar suit against Countrywide Financial Corp. in New York Supreme Court.

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