A member forwarded this article to me this morning. I haven’t seen or heard anything about it before this. This particular ruling on short-sale and loan modification relief is limited in that it apparently decided that the matter is more appropriately handled by state courts rather than Federal – but…
If this becomes a precedent on investor rights it will sound the death knell for an already shaky loan mod & short sale program. Sounds like the banks are hung out to dry here . directed by legislature to modify loans and expedite short sales, prohibited by this ruling from doing that to the detriment of their investors.
WOW. I hope more agile minds than mine are dealing with this mess.
A federal judge in Manhattan has rejected an argument by Countrywide Financial seeking certain protections from investor lawsuits under new legislation intended to encourage modifications of home loans, Gretchen Morgenson reported in The New York Times.
“I view this as an opening salvo and a demonstration that investors do have contractual rights, even when it is politically unpopular,” said William A. Frey, one of the investors who brought the lawsuit. “This is ultimately going to be one of many legal battles over who should pay the hundreds of billions of dollars in losses on mortgages.”
Bank of America, which took over servicing of the investors’ loans when it bought Countrywide in 2008, is defending the case. It argued that the matter belonged in federal court and that any contractual obligations to repurchase modified loans were trumped by the Helping Families Save Their Homes Act of 2009. Under that law, servicing companies that agree to modify loans receive some protection from liability arising from the loan changes.
Judge Holwell ruled that the immunity granted under the legislation did not prevent Countrywide’s investors from trying to enforce their rights under the mortgage securities contracts.
Investors’ lawyers hailed the decision.
Read the full article here: Countrywide Loses Ruling in Mortgage Suit