Filed under: Law, Bank of America (BAC), Housing

Everyone cheered when Countrywide Financial, owned by Bank of America (NYSE: BAC), agreed to modify loans under a settlement with 11 state attorneys general reached in October.

Everyone, that is, except the people who held those mortgages and stood to lose hundreds of millions of dollars as a result of slashed balances and reduced interest rates. So Greenwich Financial Services has filed a lawsuit in a New York state court, arguing that Countrywide does not have the right to unilaterally modify as many as 400,000 loans.

“Loan modifications have been occurring for decades without objections or challenges, so we are especially troubled at the timing of this complaint,” Countrywide said in the statement. “We are confident any attempt to stop this program will be legally unsupportable.”

It’s easy to blast Greenwich Financial as the bad guy — I was kidding in my headline — but it’s also wrong. The fact is that these modifications to previously agreed to contracts are coming out of the pockets of investors, including pension funds and investments held in 401(k) plans. There truly is no free lunch, and people should keep that in mind as they hear self-serving politicians brag about measures that help keep people in their homes.

The Grinch sues Countrywide over loan modifications originally appeared on BloggingStocks on Tue, 02 Dec 2008 13:55:00 EST. Please see our terms for use of feeds.

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