For the second time in three weeks, Bank of America has escaped liability in cases involving the Countrywide mortgage business it acquired in 2008. Last month, Manhattan federal district court Judge P. Kevin Castel dismissed claims by two trusts that had bought $43 million of residential mortgage-backed securities from Countrywide. And now BofA has won the dismissal (pdf) of a purported class action brought on behalf of more than 370 trusts that bought securitized mortgages from Countrywide. The trusts had sought a declaration requiring Countrywide to purchase any loan on which it agreed to reduce payments under a 2008 agreement with attorneys general from across the country.
The stakes in the putative class action were quite large. In its agreement with the AGs, Countrywide agreed to reduce payments on hundreds of thousands of mortgages by up to $8.4 billion. But according to the plaintiffs, Countrywide had sold off most of those loans and was determined not to absorb the costs of the payment reductions.
In dismissing the case, New York state Supreme Court Justice Barbara Kapnick ruled that the named plaintiff -- Greenwich Financial Services Distressed Mortgage Fund 3 LLC -- hadn't adhered to the pooling and servicing agreements governing the securitized mortgage loans. Among the rules, she found, is one requiring the support of at least 25 percent of certificate holders in order to initiate litigation.
Bank of America, which was represented by O'Melveny & Myers, said in a statement it was "pleased" with the ruling. "These preconditions protect investors collectively against ill-conceived litigation forays that could prove damaging to investors -- such as the Greenwich plaintiffs' bid, which would effectively halt all modifications of distressed mortgages," the company said.
Greenwich Financial counsel David Grais of Grais & Elsworth did not return a call for comment.
This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.