Countrywide, BofA Targeted Again By Investors In Lawsuit For Allegedly Peddling Crappy Mortgage Backed Securities

A number of insurance companies and retirement funds have recently filed suit against Countrywide Financial Corporation, Bank of America, and some of their officers and affiliates alleging that, between 2005 and 2007, the latter unloaded hundreds of millions of dollars in crappy Countrywide mortgage-backed securities in 148 Offerings.

The plaintiffs summary of their legal action begins with this excerpt:

• 1. This action concerns a massive fraud perpetrated by Defendant Countrywide Financial and certain of its officers and affiliates against the Plaintiffs, which are investors in mortgage-backed securities (“MBS”) issued by Countrywide’s subsidiaries. The Plaintiffs are institutional investors that wanted conservative, low-risk investments and thus bought Countrywide MBS (the “Certificates”) that were represented to be backed by mortgages issued pursuant to specific underwriting guidelines and rated investment-grade (primarily AAA). In purchasing the Certificates, the Plaintiffs and their investment managers relied on term sheets, prospectuses and other materials prepared by and provided to them by the Defendants, which made representations about the Countrywide Defendants’ purportedly conservative mortgage underwriting standards, the appraisals of the mortgaged properties, the mortgages’ loan-to-value (“LTV”) ratios, and other facts that were material to Plaintiffs’ investment decisions. Plaintiffs and their investment managers also relied on Defendants’ public statements concerning the Countrywide Defendants’ adherence to prudent underwriting guidelines and careful credit analysis. These representations by Defendants were recklessly or knowingly false when made. In reality, Countrywide was an enterprise driven by only one purpose – to originate and securitize as many mortgage loans as possible into MBS to generate profits for the Countrywide Defendants, without regard to the investors that relied on the critical, false information provided to them with respect to the related Certificates.
  
  
  2. The scope of the Countrywide Defendants’ fraud is reflected by, among other things: (i) a securities fraud action brought by the United States Securities and Exchange Commission (“SEC”) against three former senior executives of Countrywide Financial, in which the Court denied those Defendants’ motion for summary judgment and which then culminated in an historic settlement (the “SEC Action”); (ii) regulatory actions initiated by multiple state attorneys general which resulted in settlements worth over eight billion dollars; (iii) other fraud actions brought against the Countrywide Defendants by other MBS investors and insurers related to the same wrongdoing alleged herein, along with federal securities fraud claims brought against Countrywide for its misstatements to the investing public regarding the company’s mortgage loan underwriting standards; and (iv) the enormous number of defaults and foreclosures in the underlying mortgages supporting the MBS resulting in substantial damages to investors in Countrywide’s MBS.

For the entire lawsuit, see Dexia Holdings, Inc., et al. v. Countrywide Financial Corporation, et al.

Thanks to Harold for the heads-up on this lawsuit.