Countrywide can't dismiss mortgage lawsuit

Federal judge rejects bid in case that alleges racketeering, conspiracy, unfair mortgage practices.

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LOS ANGELES (Reuters) -- A federal judge in San Diego rejected Countrywide Financial Corp.'s bid to dismiss a lawsuit accusing it of steering borrowers into risky mortgages to maximize profit, lawyers for the plaintiffs said on Thursday.

The class-action complaint accuses Countrywide of inappropriately convincing borrowers to take on subprime mortgages they could not afford, violating federal racketeering and conspiracy laws, as well as state laws barring unfair competition and unjust enrichment.

Countrywide was the nation's largest mortgage lender before being acquired last July by Bank of America Corp (BAC, Fortune 500).

In a statement, Bank of America said "the ruling is NOT reflective in any way on whether the factual allegations have any merit, or whether plaintiffs will ultimately be able to prove their case."

"(Countrywide) maintains that the lawsuit is without merit and intends to vigorously defend the case," the statement said.

In a May 18 order, U.S. District Judge Dana Sabraw rejected Countrywide's argument that the plaintiffs did not show sufficient evidence of a "racketeering enterprise" among independent mortgage brokers to warrant dismissal of that part of the case.

The judge also denied Countrywide's motion to strike the state claims. Sabraw did dismiss claims by one plaintiff because he lacked standing to pursue his case.

Bank of America has faced a slew of lawsuits and regulatory investigations into Countrywide, which became synonymous with the risky lending practices that helped fuel the U.S. housing boom and subsequent bust.

Last month, Bank of America dropped the Countrywide name from its mortgage operations, renaming the business Bank of America Home Loans. To top of page

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