Court Denies in Part Motions to Dismiss FHFA’s Claims Against Countrywide and Various Underwriters

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On March 15, Judge Mariana Pfaelzer of the United States District Court for the Central District of California denied in part motions to dismiss brought by Countrywide, various individuals and various underwriters in connection with an amended complaint brought by the Federal Housing Finance Agency in connection with the sale of $26.6 billion in RMBS. Countrywide and its affiliates are alleged to have acted as issuer, originator and depositor in connection with the securitizations. The court held that FHFA plausibly alleged that the offering documents concerning the sale of the RMBS contained material misrepresentations and omissions regarding loan-to-value ratios, underwriting guidelines and credit ratings of the RMBS, but dismissed FHFA’s allegations involving owner-occupancy data. The court dismissed claims of negligent misrepresentation and aiding and abetting fraud as to all defendants, claims under Washington, D.C.’s blue sky law and Section 12(a)(2) of the Securities Act of 1933 against subsidiaries of Countrywide that were depositors, successor liability claims against Bank of America and claims under Section 11 of the Securities Act of 1933 against the Individual Defendants. Among the claims that survived the motions to dismiss are claims under Sections 11 and 12(a)(2) against the underwriter defendants and a common law fraud claim against the Countrywide defendants. Defendants initially had filed first-stage motions to dismiss FHFA’s claims on timeliness and legislative jurisdiction grounds, which the court denied last year. Order.