NEW YORK (Reuters) - Bank of America Corp (>> Bank of America Corp) has agreed to pay $375 million to settle a case brought by bond insurer Syncora Guarantee over toxic mortgage-backed securities at the center of the 2008 financial crisis.

Syncora sued Bank of America in 2009 to recover losses on securities transactions based on home loans made by Countrywide Financial, which was bought by Bank of America in 2008. Syncora said it was duped into insuring the mortgage-backed securities and that Countrywide misrepresented the quality of the underlying mortgages.

Syncora, a unit of Syncora Holdings Ltd (>> Syncora Holdings Ltd.), announced the settlement in a statement on Tuesday.

Jonathan Rosenberg, an attorney for Bank of America, did not immediately return a call seeking comment.

Home loans such as those issued by Countrywide were at the center of the financial crisis. As loans became delinquent, mortgage-backed securities such as those insured by Syncora collapsed, helping to trigger a wider market meltdown.

In its lawsuit, Syncora claimed "a significant percentage" of mortgage loans underlying the securitizations did not comply with Countrywide's representations and warranties. The bond insurer sued for fraudulent inducement and breach of contract, seeking to recover money paid out on its policies as a result of the bad loans.

"Countrywide, consistent with its business practices at the time, systematically ignored its own underwriting guidelines and made imprudent loans that no reasonable underwriter would have made," Syncora said in its lawsuit.

As of May 2010, when an amended lawsuit was filed, Syncora had already paid more than $145 million in claims and had been given notice of another $257 million.

Rulings in the Syncora case and a similar lawsuit brought by bond insurer MBIA Inc (>> MBIA Inc.) have set precedents for what bond insurers need to show to prove insurance fraud and breach of contract.

Syncora Guarantee has also sued other banks over false and misleading statements in connection with mortgage-backed securities, including JPMorgan Chase & Co over Bear Stearns & Co transactions.

The case is Syncora Guarantee Inc. v Countrywide Home Loans Inc., New York state Supreme Court, New York County, No. 650042/2009.

(Editing by Eddie Evans and Michael Urquhart)

By Karen Freifeld

Stocks treated in this article : Bank of America Corp, MBIA Inc., Syncora Holdings Ltd.