New York State Court Dismisses Suit to Force Buy-Back of Reduced Mortgages, Finding that Plaintiffs Failed to Follow “No-Action Clause” Procedures

A New York State Court has dismissed a lawsuit brought by hedge funds and other investors seeking to force Countrywide Financial Corp. and two of its subsidiaries to buy back the full balance of mortgages that had been sold to investor trusts, but had been subsequently reduced pursuant to a settlement agreement.  In throwing out the Complaint, New York State Supreme Court Justice Barbara Kapnick ruled that the Plaintiffs, Greenwich Financial Services Distressed Mortgage Fund LLC, et al., failed to meet the required procedural preconditions for bringing a suit under the trusts’ pooling and service agreements, including the support of 25 percent of certificateholders.  This article details the key facts and the court’s legal analysis in a case that provides important insight into and background for the growing trend of mortgage “put-back” litigation.

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