Bank of NY Mellon must face lawsuit on Countrywide

5 Apr

From: Charles Cox [mailto:charles@bayliving.com]
Sent: Thursday, April 05, 2012 10:17 AM
To: Charles Cox
Subject: Bank of NY Mellon must face lawsuit on Countrywide

Bank of NY Mellon must face lawsuit on Countrywide

4/3/2012

April 3 (Reuters) – A federal judge rejected Bank of New York Mellon Corp’s bid to dismiss a lawsuit by investors over its role as trustee for mortgage-backed securities that led to an $8.5 billion settlement by Bank of America Corp.

U.S. District Judge William Pauley in Manhattan said on Tuesday that bondholders who invested in 26 trusts alleged to have contained risky mortgage loans from the former Countrywide Financial Corp may pursue claims against Bank of New York Mellon. He dismissed a variety of other claims.

The decision relates to a lawsuit challenging Bank of New York Mellon’s performance of its day-to-day obligations as a trustee, which includes ensuring that underlying home loans are properly documented and that bondholders’ rights are protected.

Beth Kaswan, a lawyer for four pension funds in Chicago, Michigan and Pennsylvania that brought the case, said the decision leaves intact claims over securities backed by more than $30 billion of loans, and which have suffered more than $9 billion of losses or delinquencies.

She said she believes the decision is the first to let investors in mortgage-backed securities pursue claims against a trustee under the 1939 federal Trust Indenture Act.

"The decision is a watershed," Kaswan said.

Kevin Heine, a spokesman for Bank of New York Mellon, said the company was pleased that the court narrowed the issues to be considered and removed the vast majority of trusts from the suit. "We respectfully disagree with ruling’s application of the Trust Indenture Act to non-indenture securitizations and will continue to defend against those claims," he said.

Countrywide had been the largest U.S. mortgage lender before being acquired by Charlotte, North Carolina-based Bank of America in July 2008.

The lawsuit was filed six weeks after Bank of America reached the $8.5 billion settlement in June, which was to resolve claims by investors in 530 mortgage securitization trusts that lost billions of dollars when the housing market collapsed.

Some investors in that case faulted Bank of New York Mellon, which negotiated the accord, for accepting a low payout. The settlement was intended to resolve many of Bank of America’s liabilities from the Countrywide purchase.

NEGLIGENCE ALLEGED

In the current case, the pension funds accused Bank of New York Mellon of negligence and breach of fiduciary duty for doing nothing to remedy Countrywide’s inadequate servicing of home loans contained in the trusts.

The bondholders said Bank of New York Mellon failed to take possession of loan files, including the original mortgage notes, or require Countrywide to fix or buy back defective loans.

Such failures "created considerable uncertainty" and should make the bank responsible for bondholder losses, regardless of the fairness of the $8.5 billion settlement, the complaint said.

Pauley said the bondholders could pursue claims that Bank of New York Mellon did not properly notify them that Countrywide had defaulted on some obligations, whether as a servicer or as a mortgage lender.

The judge nonetheless said the bondholders could sue only on the basis of the 26 trusts in which they invested, not all 530 trusts covered by the $8.5 billion settlement.

On Feb. 27, Bank of America won a victory when the 2nd U.S. Circuit Court of Appeals ruled that the $8.5 billion settlement should be reviewed in a New York State court.

That ruling reversed Pauley’s October decision to move the case to federal court. It meant the settlement’s fairness will be reviewed under a state law that gives Bank of New York Mellon wide discretion to negotiate with bondholders.

The case is Retirement Board of the Policemen’s Annuity and Benefit Fund of the City of Chicago et al v. Bank of New York Mellon, U.S. District Court, Southern District of New York, No. 11-05459.

For the Retirement Board: David Scott of Scott & Scott.

For BNY Mellon: Matthew Ingber and Paula Lin of Mayer Brown.

(Reporting by Jonathan Stempel)

Charles
Charles Wayne Cox – Oregon State Director for the National Homeowners Cooperative
Email: mailto:Charles
Websites: http://www.NHCwest.com; www.BayLiving.com; and www.ForensicLoanAnalyst.com
1969 Camellia Ave.
Medford, OR 97504-5403
(541) 727-2240 direct
(541) 610-1931 eFax

Paralegal; CA Licensed Real Estate Broker; Certified Forensic Loan Analyst. Litigation Support; Mortgage and Real Estate Expert Witness Services.

Retirement-Board-of-the-Policemen.pdf

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One Response to “Bank of NY Mellon must face lawsuit on Countrywide”

  1. Deadly Clear May 13, 2012 at 7:45 pm #

    It’s about time! What we need to start doing is sharing these lawsuits with our local police departments. At a local Occupy gathering in Hana, HI (where we all know each other pretty well), I popped up the Inside Job trailer on my iPhone and shared it with the local police and suggested that they look at my blog for the post THE SUCKER PUNCH on http://www.deadlyclear.com so they can see where all their pension and retirement funds have been gambled away so they’ll know why benefits are being cut and changes are being made.

    I can tell you they were amazed they had no idea what had happened… And frankly, I think they were a lot less sympathetic toward the banks. Unlike NY, Hana police are not paid off with cushy security jobs protecting Wall Street banksters. We’ve decided to have a movie night and show Inside Job for the community, followed by the upcoming Confidence Game and I’ll be delivering them a personal invitation.

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