(CN) – Countrywide Financial can’t hide from investor lawsuits under new federal legislation aimed at encouraging modifying home loans, a federal judge ruled.
The mortgage company sought protections from such lawsuits via the Helping Families Save Their Homes Act of 2009, which gives servicing companies some protection from liabilities if they agree to modify loans.
Greenwich Financial Services Distressed Mortgage Fund and QED LLC, a pair of investment funds “as holders of the now-infamous mortgage-backed securities whose decline in value has hobbled the financial markets,” filed a class action against Bank of America, which bought Countrywide in 2008.
They accused the bank of reneging on promises to buy back any loans it agreed to modify at a price equal to the unpaid principal and accrued interest.
Defendant removed the complaint to the state court, and plaintiff moved to remand two weeks later.
BofA wanted to keep the matter in Federal Court because any duties it has to buy back modified loans is trumped by the new federal law.
But U.S. District Court Judge Richard Holwell in New York remanded to state court, finding that such federal immunity didn’t prevent Countrywide investors from pursuing their claims.
“It is tempting to find federal jurisdiction every time a multi-billion dollar case with national implications arrives at the doorstep of a federal court,” Holwell wrote. “Congress passed two statutes within a year of each other to address the mortgage crisis. In neither of these statutes did Congress federalize the case.”