Maine State Retirement System v. Countrywide: Federal Judge Certifies Countrywide Securities Class Action

A California district court judge granted certification in a class action against Countrywide Financial.  The plaintiffs allege that the home mortgage giant, now owned by Bank of America, engaged in deceptive practices while selling billions of dollars in mortgage-backed securities.  See Maine State Retirement System v. Countrywide Financial Corp., No. 2:10-cv-00302 (C.D. Cal. Nov. 16, 2011) (order granting class certification) (available here).  The class consists of all persons and entities that bought Countrywide’s mortgage-backed securities before January 14, 2010, and includes participants in several public employee pension plans.  Id.

The certified class can now pursue claims that Countrywide and its investment banks made misleading statements and omissions in connection with the issuance of highly risky mortgage-backed securities, which were secured by mortgages virtually certain to result in defaults.  See Second Amended Complaint, Maine State Retirement System v. Countrywide, No. 2:10-cv-00302 (C.D. Cal., filed Dec. 6, 2010), ¶¶ 4-10.  The inevitable mortgage defaults revealed that the properties underlying the mortgages were worth materially less than the loans issued to the borrowers, and that the borrowers were unable to cover the outstanding mortgage balances.   Id. at ¶¶ 10-17. 

The class certification order came after Countrywide stipulated to a proposed class in conformity with the judge’s previous rulings in the case, thereby cutting short protracted legal argument over class certification.  See Maine State Retirement System v. Countrywide Financial Corp., No. 2:10-cv-00302 (C.D. Cal. Nov. 16, 2011) (order granting class certification).