A lawsuit against Bank of America Corp. aimed at forcing Countrywide Financial Corp. to buy back mortgages sold to trusts will stay in state court. A federal judge has ordered the case to be tried in state court. Countrywide, the lender acquired by Bank of America, was sued last year by hedge fund Greenwich Financial Services Fund over claims the value of trusts used to package its mortgages into securities will fall if it revises 400,000 loans in an agreement with 15 state Attorneys General.
The fund contents that investors would be harmed by the settlement Bank of America reached to aid home-loan borrowers by a combined total of $8.4 billion. The bank said two U.S. laws aimed at helping owners keep their homes gave loan servicers the right to modify any mortgage loans, without repurchasing them, if certain guidelines are maintained. Judge Richard Holwell of the Southern District of New York said in his order:
Congress passed two statutes within a year of each other to address the mortgage crisis. In neither of these statutes did Congress federalize the case before this court.
In the proposed class action the Greenwich, Connecticut-based fund demands a declaration that Countrywide must purchase modified mortgage loans for the full unpaid amount that it sold to any of the 374 securitization trusts.
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