GLOBAL - The Netherlands' largest pension fund ABP has seen its lawsuit against Countrywide Financial over "hundreds of millions" in losses dismissed by a US court on the grounds the statute of response has passed.
Countrywide, one of the largest mortgage lenders in the world, was acquired by Bank of America in early 2008, ahead of the institution's merger with Merrill Lynch.
The €242bn pension fund for civil servants alleged in a court filing earlier this year that Countrywide made "false and misleading statements" as the scheme sought to buy residential mortgage-backed securities (RMBS).
However, Judge Mariana Pfaelzer of Los Angeles federal court ruled last week that the disputed sales now fell outside the statute of response - set at five years - and could no longer be prosecuted. ABP filed the suit in question in mid-February.
In the filing, ABP alleged that, between December 2004 and June 2007, it bought RMBS following "false and misleading statements" made by Countrywide.
The court was told in February's filing: "Plaintiff [ABP] reasonably and justifiably relied on these untrue statements and omissions of material information in deciding to purchase the Certificates.
"As a result of these material misrepresentations and omissions, ABP purchased securities that were far riskier than represented, backed by mortgages worth significantly less than represented, that had been made to borrowers who were dramatically less creditworthy than had been represented.
"As a consequence, ABP has suffered losses of hundreds of millions of dollars on its purchase."
The scheme explained that Countrywide did not hold the mortgage loans it originated, instead pooling many of them and depositing these in trusts - then, in turn, securitised these into RMBS and had the trusts sell them as Certificates.
In its filing, the scheme further alleged that the firm "engaged in a wholesale and systematic abandonment of its underwriting guidelines", meaning the value of the properties ended up being overstated, thereby exposing investors to further losses in the case of a foreclosure.
Asked about its next action, an ABP spokesman told IPE: "The only thing we can say at this point in time is that we are disappointed by the ruling and are considering the merits of an appeal."