On February 23, 2011, a group of holders of RMBS certificates represented by Plaintiffs’ lawyer David Grais filed a breach of contract claim against Countrywide Home Loans (now part of Bank of America) in New York State court, alleging that they were defrauded into purchasing over $1 billion in RMBS. The plaintiffs, who allege that they collectively own more than 25% of the voting rights in the issuer, sue derivatively on behalf of the Trustee, the Bank of New York Mellon, which is named as a nominal defendant. Plaintiffs ask the court to enforce a buyback provision in the Pooling and Servicing agreement or alternatively to award damages. Complaint.
Countrywide
RMBS Complaint Filed Against Countrywide in Connecticut
On January 27, 2011, Putnam Bank filed a putative class action in the District of Connecticut accusing Countrywide Financial Corp. (now an affiliate of Bank of America) and several executives of selling RMBS backed by materially false statements and omissions. The putative class covers purchasers and acquirers of eight different series of RMBS certificates issued between 2006 and 2007. Plaintiffs seek compensatory and/or recessionary damages under both Federal and Connecticut Securities laws. Complaint.
RMBS Complaint Filed Against Countrywide in New York State Court
On January 24, 2011, a group of institutional investors represented by Bernstein Litowitz, including Dexia Holdings Inc., TIAA-CREF Life Insurance Co., and New York Life Insurance Co., filed a case in New York State Court accusing Countrywide Financial Corp. (now an affiliate of Bank of America) and several executives of selling RMBS backed by materially false statements and omissions made knowingly or recklessly. Plaintiffs seek compensatory and/or rescissionary damages for fraud and negligent misrepresentation, statutory damages under the Securities Act, and punitive damages for common-law fraud. Complaint
Allstate Sues Countrywide for Securities Fraud
On December 27, 2010, Allstate Insurance Company filed a complaint in the Southern District of New York against Countrywide Financial Corporation and several affiliates and individual officers alleging a variety of federal securities claims in connection with alleged material misstatements or omissions in the offering documents for several RMBS. Allstate seeks rescission and damages in connection with its alleged purchases of $700 million in RMBS certificates from Countrywide during the period from March 2005 to June 2007. Complaint.
Los Angeles Federal Court Has Jurisdiction Over RMBS Suit
On December 29, 2010, the Honorable Mariana R. Pfaelzer denied a motion by Stichting Pensioenfonds ABP (“Plaintiff”) to remand its claims against Countrywide and others to state court. Judge Pfaelzer concluded that the case was sufficiently related to a bankruptcy case to confer federal jurisdiction in light of contractual indemnification obligations of a bankrupt originator, American Home Mortgage Corp., to Countrywide. The Court also concluded that there were no equitable grounds meriting remand. Decision.
Ally Financial Inc. and Bank of America Settle with Fannie Mae and Freddie Mac
On December 27, 2010, Ally Financial Inc. announced that its residential mortgage unit, Residential Cap, LLC, paid $462 million to settle repurchase demands from Fannie Mae regarding mortgage-backed securities. On January 3, 2011, Bank of America also announced that it recently reached a settlement agreement with Fannie Mae and Freddie Mac., pursuant to which it paid $1.28 billion to Freddie Mac and $1.52 billion to Fannie Mae to resolve “outstanding and potential mortgage repurchase and make-whole claims” arising from any alleged breaches of representations and warranties made by Countrywide in loan sales. BoA Press Release. Ally Press Release.
FHLBP Claims Dismissed In Part
On November 29, 2010, Judge R. Stanton Wettick Jr. of the Court of Common Pleas of Allegheny County, in Pittsburgh, Pennsylvania, decided motions to dismiss three RMBS actions in which the Federal Home Loan Bank of Pittsburgh (FHLBP) alleged misrepresentations by various J.P. Morgan and Countrywide affiliates and three rating agencies (Moody’s, S&P and Fitch). The court dismissed all claims asserted against the rating agencies except for state law fraud claims. The court sustained a variety of claims against the J.P. Morgan and Countrywide defendants, however, and rejected their argument, relying on the Fifth Circuit’s decision in Lone Star Fund V (U.S.) v. Barclays Bank, PLC, 594 F.3d 383 (5th Cir. 2010), that the offering documents’ disclosure of a sole “repurchase or cure” remedy for non-conforming mortgage loans demonstrated that there was no misrepresentation. Decision.