July 19 |
Tue Jul 19, 2011 1:03am EDT

July 19 (Reuters) – U.S. money manager Federated Investment
Management Co has filed a complaint against Countrywide
Financial and its parent Bank of America Corp over the
sale of mortgage derivative products that lost value during the
financial crisis, court documents showed.

Federated Investment had purchased more than $185 million of
mortgage-backed securities (MBS) issued by affiliates of
Countrywide Financial and Bank of America, according to the
court filing.

MBS is a type of derivative instrument composed of
a few mortgage securities. The financial value of the MBS
is, in turn, dependent on the performance of its underlying
mortgages.

The fund said in its complaint that it purchased the risky
securities as a result of “material misrepresentations and
omissions” by Countrywide Financial and BofA.

As of May 2011, the market value of the mortgage
certificates had plunged, in some cases, to below 10 cents on
the dollar, Federated Investment said.

The company has demanded a jury trial and sought
compensatory damages from Countrywide Financial and
BofA.

So far this year, BofA has entered into three major
settlements totaling $13 billion with outside investors who
claimed the bank needed to repurchase toxic home loans that were
part of mortgage-backed securities.

But after the settlement agreements, the bank is still on
the hook for buying back billions in bad mortgages.

The case is in re: Federated Investment Management Co vs
Countrywide Financial, Bank of America et al, Case No. BC465659,
Superior Court of the State of California, Los Angeles County.

(Reporting by Sakthi Prasad in Bangalore; Editing by Vinu
Pilakkott)