A small bank filed suit against Countrywide Financial Corp., and its current owner Bank of America (BAC), this week claiming it lost money investing $14 million in mortgage-backed securities tied to Countrywide home loans.
The suit was filed by Valley Bank, a state chartered bank with locations in Florida and Illinois.
Another Illinois-based plaintiff, Freedom Bank, signed onto the suit alleging the defendants misrepresented the quality of RMBS securities that were supposed to provide for safe, fixed-income investments.
Instead, the plaintiffs claim the poor, underlying quality of the loans led to large-scale losses on the securities, forcing the small banks to sell off the securities at considerable losses. Valley Bank says the effected offerings include the mortgage pass-through certificates, series 2006-J5; the series 2007-16CB; and the series 2007-J2.
The case, which was filed in federal court in the Central District of California, alleges fraud, fraudulent inducement, aiding and abetting fraud and successor and vicarious liability.
