Investors charge ahead with another reps and warranties case against BofA
Bank of America (BAC) is facing another lawsuit over misrepresentations Countrywide Financial Corp. allegedly made when selling residential mortgages to a trust in which The Bank of New York Mellon (BK) served as trustee. The plaintiff is Walnut Place, and other investors in securities tied to the trust. The parties filed suit against Countrywide Home Loans Inc., now part of Bank of America, alleging Countrywide breached a pooling and servicing agreement it signed with the Trust by misrepresenting the quality of residential mortgages backing securities sold to plaintiffs. The Walnut Place plaintiffs hold $115 million in certificates from one portion of the trust and $291 million from another. The plaintiffs claim Countrywide's alleged loan-to-value ratios were inaccurate, causing the plaintiffs to underestimate the risk of their investments. "Countrywide Home Loans represented and warranted that no loan had a loan-to-value ratio of more than 100%, but, in fact, at least 373 mortgage loans had loan-to-value ratios of more than 100%," the plaintiffs wrote in a suit filed in a New York state court. The plaintiffs are suing Countrywide derivatively, or on behalf of the trust, since The Bank of New York Mellon agreed to settle with Countrywide in a settlement agreement released earlier in the year for what plaintiffs call "pennies on the dollar" to end any potential litigation against BofA by the Trust, itself. This led to a situation where the plaintiffs are now having to sue on their own without the trustee to force Countrywide to repurchase the bad loans. The agreement with the trust that the plaintiffs refer to in the as is the $8.5 billion settlement that Countrywide and Bank of America proposed to settle a slew of mortgage-backed securities issues tied to investors. The plaintiffs have petitioned the court, rejecting the settlement on the grounds they believe it's not adequate to cover all losses. Write to Kerri Panchuk.