Federal Court Says Suit Against Loan Servicers Belongs In State Court; Who Bears Losses To Be Decided Under State Contract Law

 

The federal court rejected federal jurisdiction – and refused to accept a broad reading of statutory protections for servicers under the Helping Families Save Their Homes Act of 2009 –   suggesting instead that it was simply a matter of contract. The court’s ruling, in Greenwich Financial Services Distressed Mortgage Fund 3, LLC, v. Countrywide Financial Corp., 08 Civ. 11343 (RJH) (S.D.N.Y. Aug. 14, 2009), is undoubtedly being studied closely by mortgage investors, lenders and of course servicers around the country.