BofA gets early win in loan buyback dispute
Bank of America (BAC) said Friday that it expects the number offerings involved in a class action lawsuit against its acquisition Countrywide Financial Corp. to be substantially reduced after a California court dismissed an amended version of the case filing. Bank of America believes the number of offerings considered for prosecution will drop from 427, or $352 billion, to no more than 22, approximately $31 billion. The case, Maine State Retirement System v. Countrywide Financial Corporation, et al., alleged that Countrywide violated the Securities Act of 1933 with the issuance of mortgage-backed securities in 2007. The case began in November 2007 and was originally called Luther v. Countrywide Home Loans Servicing LP. The allegations under the original case were the same as Maine State and dealt with more than 420 offerings. The Luther case, however, was dismissed by in January by the California court. The court said Luther lacked "subject matter jurisdiction." Just eight days after Luther was dismissed, Maine State was filed. The total number of offerings alleged to have violated securities law was 427. Maine State plaintiffs claimed the quality of the loans was misrepresented to them and influenced investor to purchase "securities that were far riskier than represented," according to the case filing. Thursday the U.S. District Court for the Central District of California granted Countrywide's motion to dismiss the complaint, ruling that the plaintiffs have standing to sue only over the offerings of MBS they actually purchased. The court said the statute of limitations on the Luther offerings would be delayed, or effectively removed from the case. The Maine State plaintiffs now have 30 days to file a second amended complaint. Write to Christine Ricciardi. Disclosure: The author holds no relevant investments.