Bankruptcy

Mortgage Modification Investor Lawsuit

By Adam Levitin

The District Court ruling in Greenwich Financial Services v. Countrywide, addressing the servicer safe harbor provision for doing loan modifications, is linked here.  See here for the NYTimes story.  See here for the complaint. 

Quick version:  the ruling went against Countrywide, but it was a procedurally based ruling about whether the case belongs in Federal District Court or state court at this point, not on the merits.  (As an aside, I think the reason this case wasn't removed to the Federal District Court on diversity jurisdiction grounds is because Countrywide is a "citizen" of New York, so under the Class Action Fairness Act removal isn't possible.  28 U.S.C. 1441(b).)

What I find most fascinating about this case is that it is the only investor lawsuit related to modifications about which I know.  (But please post in the comments if I'm wrong on this.)  For a while the story we heard from servicers was one of avoiding loan mods due to the fear of litigation (of course, there could just have easily been litigation for not doing mods).  Interesting how that litigation never materialized. 

Full post as published by Credit Slips on August 20, 2009 (boomark / email).