Mortgage Backed Securities Bought By Institutional Investors Now At Junk Status
The Nation's Leading Mortgage Securitization Legal Team provides the most comprehensive, detailed, securitization memorandum identifying the REAL OWNERS of the notes that were sold on wall street as mortgage backed securities...
Online, January 30, 2011 (Newswire.com) - NEW YORK - Bank of America Corp's Countrywide mortgage unit has been sued by investors claiming they were victimized in a "massive fraud" when they bought mortgage-backed securities.
The lawsuit was filed on Monday in a New York state court by 12 plaintiffs including the TIAA-CREF fund family, New York Life Insurance Co and Dexia Holdings Inc.
According to the complaint, the investors bought hundreds of millions of dollars of Countrywide securities from 2005 to 2007 that they thought were "conservative, low-risk investments."
The investors said Countrywide misrepresented the securities' safety in offering documents and elsewhere, and compromised their investments by ignoring its underwriting guidelines.
As a result, the complaint said, most of the securities now carry "junk" credit ratings rather than the "triple-A" ratings they once had, resulting in "significant losses."
The plaintiffs want compensatory and punitive damages.
Bank of America spokeswoman Shirley Norton said in a statement that the lender would review the lawsuit, "but on first glance these sound like large, sophisticated investors who now want to blame someone for the fact that the declining economy caused their investment to lose value."
Other defendants include several former Countrywide officials, including longtime Chief Executive Angelo Mozilo.
David Siegel, a lawyer for Mozilo, said the lawsuit has no basis in law or fact.
"We expect to prevail against these plaintiffs as we have against other sophisticated MBS investors," Siegel said.
Mozilo agreed in October to a $67.5 million settlement of a U.S. Securities and Exchange Commission civil fraud lawsuit accusing him of misleading investors.
Countrywide had been the largest U.S. mortgage lender before it was bought in 2008 by Bank of America.
In the fourth quarter of 2010, Bank of America took a $2 billion writedown on Countrywide. It also set aside $4.1 billion for legal costs tied to home loans it is buying or is likely to buy back from investors.
The insurer Allstate Corp sued Bank of America last month over the alleged misrepresentation of risks on more than $700 million of mortgage debt it bought from Countrywide.
The case is Dexia Holdings Inc et al v. Countrywide Financial Corp et al, New York State Supreme Court, New York County, No. 650185/2011.
http://www.msnbc.msn.com/id/41262036/ns/business-us_business/
IN OTHER RELATED NEWS..........
SAN FRANCISCO CHRONICLE
More people suing banks over foreclosures
MORTGAGE MELTDOWN
By Robert Selna, Chronicle Staff Writer
Struggling Bay Area homeowners are joining an emerging national trend by suing banks for breaking contracts when the lenders refuse to make temporary loan modifications permanent - even though owners have done their part.
The lawsuits reflect growing frustration among homeowners who believe that banks are treating them unfairly, and they follow failed attempts by the government to force lenders to fully consider modifications before foreclosing. The suits have twin goals: to make mortgage modifications stick, and to raise the national profile of such cases so banks reform their practices.
Lawyers who filed class-action suits in U.S. District Court in San Francisco last year against JPMorgan Chase and Wells Fargo are expecting rulings in the coming months that will determine whether their claims can move forward.
Most of the lawsuits involve agreements between homeowners and banks under the federal government's Home Affordable Mortgage Program, in which lenders agreed to participate as part of the taxpayer-funded bank bailout. Others relate to letters from banks implying that borrowers can avoid foreclosure by making reduced mortgage payments for a trial period.
Federal guidelines discourage, but do not prohibit, banks participating in the mortgage program from foreclosing on homeowners while negotiating a modification. And, after intense lobbying by the banking industry, California's state Assembly rejected legislation intended to protect such homeowners.
Program ineffective
Meanwhile, the federal program, the Treasury Department's central effort to slow the rate of foreclosures, is now expected to help just a quarter of the 4 million households it originally was intended to aid through 2012.
The California and national mortgage bankers associations declined to comment on the lawsuits, as did JPMorgan Chase and Wells Fargo.
In a recent decision that may forecast the future for the California cases, a Boston federal judge let stand a lawsuit against JPMorgan Chase for breach of contract when the bank denied permanent mortgage modifications to borrowers who had made reduced payments for a trial period.
The case has many more hurdles to clear before it would go to trial, but the fact that it survived a motion to dismiss - Chase argued that its loan-modification agreement was not an enforceable contract - has emboldened lawyers across the country in similar claims against loan servicers.
'Some ambiguity'
Share:
Tags: certified forensic loan auditors, foreclosure, mortgage fraud, mortgage securitization
