Countrywide Financial Corp., now owned by Bank of America (BAC), asked a U.S. district court in Texas to stay a mortgage-backed securities lawsuit filed by the Federal Deposit Insurance Corp. until a final decision is made on whether the case will be consolidated with other MBS suits.
In the original complaint, the FDIC, as receiver for now defunct Houston-based Franklin Bank, accused Countrywide and other associated entities of making material misstatements and omissions on mortgage-backed securities sold by Countrywide. In early 2008, Bank of America stepped in and bought the troubled subprime lender.
The FDIC is representing Franklin Bank, which was closed by the FDIC and the Texas Department of Savings and Mortgage Lending in November 2008.
The lawsuit closely resembles 17 other RMBS cases involving Countrywide that have already been consolidated in the Central District of California before Judge Mariana Pfaelzer. At the moment, parties in the FDIC v. Countrywide case are waiting for a judicial panel on multidistrict litigation to decide whether this particular MBS case should be consolidated with 17 other similar suits in Pfaelzer’s court.
Countrywide says allowing the FDIC case to go forward without a decision on consolidation would create inefficiencies, waste judicial resources and put the parties at risk of receiving inconsistent opinions.
“The risk of inconsistent decisions is very real here,” Countrywide said in its motion. “Judge Pfaelzer has decided (or has pending before her) remand motions addressing both of Countrywide’s grounds for removal in this case. Centralizing this case before her will ensure that a single judge presides over such motions, preventing inconsistent rulings — as well as the duplicative expenditure of judicial resources on common factual and legal issues.”
Countrywide said it wants a stay on the case until the parties hear back on whether the case will be consolidated with 17 others.
Write to Kerri Panchuk.
