A N.Y. bank sues Countrywide, BofA over mortgages

NEW YORK, Nov 25 (Reuters) - Amalgamated Bank of New York has sued Countrywide Financial Corp, now owned by Bank of America (BAC.N), claiming it was sold $212 million worth of high-risk, nonperforming mortgages circumventing underwriting guidelines.

The lawsuit, filed in New York State Supreme Court on Monday, said Amalgamated stands to suffer losses because of the deterioration in the loans bought from Countrywide, which was the largest U.S. mortgage lender before Bank of America bought it for $2.5 billion on July 1.

A spokeswoman for Bank of America's mortgage division could not immediately be reached for comment.

The complaint by Amalgamated, which said it serves working people and small businesses in New York, said that between Dec. 2006 and May 2007, the bank bought four portfolios of home equity lines of credit, known as HELOC, from Countrywide for a total of $212 million.

But Countrywide deliberately permitted mortgages by going around its own underwriting guidelines, the complaint said. The bank said that it began to see problems with the loans by November of 2007, uncovering deficiencies with the way the loans were originated and underwritten.

"Even where the income and asset information submitted by its borrowers raised red flags, Countrywide willfully ignored these red flags," according to the complaint. "In further breach of its covenant of good faith and fair dealing, Countrywide included previously rejected loans in later portfolios to Amalgamated."

Two weeks ago, Bank of America said it had agreed to assume $16.6 billion of debt and guarantees of Countrywide Financial Corp. Substantially all of the assets and operations of Countrywide and its Countrywide Home Loans unit were transferred to Bank of America. (Reporting by Grant McCool; Editing by Tim Dobbyn)