Investors filed a lawsuit in New York State Supreme Court in Manhattan on Monday over the recent predatory lending settlement that Countrywide parent, Bank of America had agreed to in October with 11 state attorney generals.
The lawsuit was filed by Greenwich Financial Services Distressed Mortgage Fund 3 LLC and QED LLC, two Connecticut limited liability companies that purchased the securities.
The suit claims investors are not objecting to plans of the $8.4 billion in loan modifications, but seek a declaration from the court that the lender “is required to purchase any loan on which it agrees to reduce the payments.” In other words, investors want to make sure that B of A eats the losses generated from these modifications.
In October, Bank of America settled a highly publicized 11 state predatory lending lawsuit by agreeing to loan modifications on as many as 390,000 mortgages originated by Countrywide. The suit alleges most of the loans covered in the suit are not owned by Countrywide, only serviced by the servicing giant.
Apparently B of A is not backing down to the group. Shirley Norton, a Bank of America spokeswoman, said this.
Norton said the bank believes the program “proactively addresses” a potential for far greater investor losses than would be realized without the modifications.
“Loan modifications have been occurring for decades without objections or challenges, so we are especially troubled at the timing of this complaint,” Norton said. “No one benefits if we allow these homeowners to advance toward ultimate foreclosure. We are confident any attempt to stop this program will be legally unsupportable.”
Norton said Countrywide believes the lawsuit represents “an unlawful effort to assert rights of the trusts” and it will pursue “any and all remedies available, ” including recovery of costs incurred to defend the action.
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