Investors reportedly are filing Federal Cases to try to compel originators of "MBS" or "Mortgage-Backed Securities" to buy back the Plaintiffs' investments and perhaps to pay them Interest and even Damages. Lawsuits are generally filed under the Federal Securities Act of 1933 and allege that the Defendant "made materially untrue or misleading statements or omissions" regarding the Defendant's "loan origination practices in public offering documents". Download Maine State Retirement System v. Countrywide Financial Corp. (C.D. Cal. Case No. 2.10cv00302, Order Dismissing Amended Class Action With Leave, Filed November 4, 2010)PUBLIC ACCESS, Slipsheet Opinion attached at 2.
These Lawsuits and allegations can have the effect of raising a wide range of Insurance Coverage Issues when the Defendant and its Officers and Directors claim Coverage for their alleged actions and omissions.
In the linked Order Dismissing Amended Class Action With Leave, the U.S. District Court for the Central District of California was faced with an Amended Class Action Complaint against Countrywide and others. The amount at stake came from Countrywide's origination or purchase between 2005 and 2007 of $1,400,000,000.00 or $1.4 Trillion in mortgage loans.
The issue at hand in that Federal Case, however, did not involve the merits of the Plaintiffs' Claims. The Federal Court held that the Plaintiffs' Amended Class Action Complaint was legally deficient for two reasons unrelated to the substance of the Plaintiffs' charges against Countrywide.
First, the Court held that as a matter of settled Federal Law the Plaintiffs in that Case could not "represent the interests of investors in MBS offerings in which the plaintiffs did not themselves buy." Download Maine State Retirement System v. Countrywide Financial Corp. (C.D. Cal. Case No. 2.10cv00302, Order Dismissing Amended Class Action With Leave, Filed November 4, 2010)PUBLIC ACCESS, at 5. Accordingly, the Plaintiffs were given leave to amend to specifically allege the MBS offerings in which they did buy. Id. at 7.
Second, the Federal Court held that, for reasons related at least in part to its Standing ruling in this case, Download Maine State Retirement System v. Countrywide Financial Corp. (C.D. Cal. Case No. 2.10cv00302, Order Dismissing Amended Class Action With Leave, Filed November 4, 2010)PUBLIC ACCESS, at 11-12, the Amended Class Action Complaint raised questions about whether some or any of the Plaintiffs' Claims were filed on time, or whether instead some or any of those Claims are barred by the Statute of Limitations. Accordingly, said the Federal Judge in this Case, although the Statute of Limitations is an Affirmative Defense which Countrywide and the other Defendants must prove in that Case, the Plaintiffs are given leave to amend -- ordered to amend, actually -- their Class Action Complaint to also specifically allege the dates on which they purchased their securities from Countrywide. Id. at 12-13.
The next round of allegations and dispositions in this Case is coming.
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