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Class Action Filed Over Countrywide Securities

NEW YORK CITY-A suit filed in the state Supreme Court alleges the bank is obligated to repurchase up to 400,000 loans; Countrywide says the suit has no merit.

By Paul Bubny | Updated on December 03, 2008

NEW YORK CITY-A class-action suit has been filed against Countrywide Financial Corp. on behalf of investors in 374 securitization trusts to which the company sold subprime and Alt-A mortgage loans. The suit, filed in New York State Supreme Court, alleges that Countrywide is required to purchase, at full par value, any loan on which it had agreed to reduce payment as part of its Oct. 6 settlements with 11 attorneys-general over predatory lending practices.

As part of those settlements, Countrywide had agreed to reduce payments due on hundreds of thousands of mortgage loans by up to $8.4 billion. “Countrywide plans not to absorb the $8.4 billion reduction in mortgage payments itself…but rather to pass most or all of that reduction in to the trusts that purchased mortgage loans from Countrywide,” the complaint states. “If the trusts 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.”

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