Seattle-based Washington Federal sued Countrywide Financial, now part of Bank of America (BAC), claiming the mortgage lender misrepresented the quality of approximately 1,000 loans sold to the federally chartered savings association.

The case also steps into the terrain of mortgage servicing, with the plaintiff suggesting Countrywide failed to comply with an agreement to appropriately service the mortgages.

The original aggregate balance of the loans reached $400 million. It involves loans acquired over a three-year period beginning in 2004, according to the complaint.

Countrywide also is accused of breaching at least one representation or warranty contained in the mortgage loan purchase and servicing agreement. BofA did not comment on the case, but has already sought a declaratory judgment in a California court that Countrywide did not breach its contractual obligations to Washington Federal.

Washington Federal claims Countrywide was in charge of servicing the loans and failed to follow guidelines on how to handle borrowers, foreclosure proceedings and other actions, such as appropriately maintaining REO properties.

The complaint asserts that Countrywide and related businesses failed to "take reasonable measures to protect the value of Washington Federal's collateral by taking control of abandoned properties or evicting persons in unlawful possession."

Washington Federal says the lender's failure to satisfy the terms of the contract led to a loss of market value on the underlying collateral and the entire portfolio. The bank also claims Countrywide owes servicing fees that were paid out, but not earned based on the original terms of the servicing agreement.

Some of the issues allegedly uncovered include mortgage notes with facial deficiencies, loans with interest rates that vary from the rate listed on the mortgage schedule and loans classified as "full doc" loans when Washington Federal claims the loans lacked income verification support.

Washington Federal is asking the court to force BofA to buy back all of the defaulted or charged-off loans sold under the agreement. The bank also wants a refund of all servicing fees paid to Countrywide and Bank of America and an order from the court saying the lender's failure to properly service the loans breached the initial contract.

Washington Federal also put in a claim for damages to cover the expense of servicing the loans appropriately.