Hedge Fund’s Countrywide Suit Stays In State Court

Aug 21 2009 | 3:25am ET

Bank of America will have to battle its hedge fund nemesis in state court, after a federal court refused its bid to move the case over revising the terms of mortgages to the new venue.

The Greenwich Financial Services Fund wants Countrywide Financial Corp., which BofA bought last year, to repurchase any mortgages loans sold to securitization trusts—at full price—that it renegotiates. After buying the troubled lender, BofA struck a deal with 15 state attorneys general to aid borrowers to the tune of $8.4 billion, settling predatory lending charges. Greenwich Financial says that would hurt any investors who bought the 374 securitization trusts that contain the 400,000 mortgages it planned to revise, and that Countrywide-BofA should take the hit itself, rather than passing it along to bondholders.

BofA sought to move the battle from state court to federal court, but was rebuffed yesterday.

“Congress passed two statutes within a year of each other to address the mortgage crisis,” U.S. District Judge Richard Holwell wrote in his ruling, sending the case back to New York state court. “In neither of these statutes did Congress federalize the case before this court.”

Greenwich Financial is seeking class-action status for its lawsuit.

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