Investors of securities backed by “Countrywide”: mortgages filed a lawsuit against the lender on Monday, alleging that Countrywide has no right to modify under-performing loans that were packaged and sold as securities.
In early October, Countrywide’s parent company, Bank of America, reached an agreement with 15 state attorneys general to settle claims against Countrywide regarding predatory lending practices. Under the deal, Bank of America agreed to modify as many as 400,000 Countrywide loans, reducing payments due on mortgages it services by as much as $8.4 billion.
Investors who now hold those loans are demanding that Countrywide buy back every mortgage it plans to modify under the multi-state settlement agreement. The lawsuit was filed by the law firm of “

Grais & Ellsworth LLP”:http://www.graisellsworth.com in the New York State Supreme Court, on behalf of Connecticut-based Greenwich Financial Services Distressed Mortgage Fund 3 LLC and QED LLC, which purchased the mortgage-backed securities (MBS).
The complaint claims that Countrywide is shifting the $8.4 billion modification cost to 374 mortgage trusts, related to two series of securitizations known as CWL and CWALT. The plaintiffs say they do not oppose the settlement reached between the attorneys general and Countrywide, but are seeking resolution from the court that the lender “is required to purchase any loan on which it agrees to reduce the payments.”
The complaint also said that if the trusts involved “are forced to absorb the reduction in payments occasioned by Countrywide’s settlement of the allegations against it, then the value of the securities that those trusts sold to investors will decline,” causing damages to the bond investors.
According to lawyers for the plaintiffs in the complaint, Countrywide and Bank of America would be liable to pay hundreds of trusts a total of about 80 billion dollars for loans it has promised to modify, a “Reuters“: report said.
Countrywide has denied it is required to repurchase the loans it intends to modify, and said it was considering the interests of investors when it agreed to the October settlement. Bank of America said it was “disappointed in this attack on a program intended to keep at-risk families in their homes” and help stabilize the spiraling housing market.