Bank of America's decision to modify bad Countrywide Financial loans as part of a predatory lending settlement has resulted in a lawsuit from a group of bond investors, according to published reports.
The lawsuit, filed in the New York State Supreme Court on behalf of Greenwich Financial Services Distressed Mortgage Fund 3 LLC and QED LLC, claims Countrywide will not take on the $8.4 billion cost of its modification program but instead will shift that expense to the trusts in which its loans were securitized. The plaintiffs say Countrywide must buy back the loans for which it plans to reduce payments.
"Their intention is to modify them, and they don't have the right to do that," William Frey, president of Greenwich Financial, told the New York Times.
A Countrywide statement says the lender is confident that "any attempt to stop this program will be legally unsupportable."
"Loan modifications have been occurring for decades without objections or challenges, so we are especially troubled at the timing of this complaint," the statement reads.
SOURCE: BusinessWeek, New York Times
