BofA Disowns Its Own Lawyer's Argument in Fumbled Mortgage Case

To quell doubts about its mortgage unit's handling of documents, Bank of America Corp. is distancing itself from … itself.


B of A now says that a senior litigation manager — who had 10 years' experience working at Countrywide Home Loans Servicing LP — was out of her depth when she testified in a New Jersey courtroom about the unit's document practices. The Charlotte company also says the local lawyer that represented it essentially fumbled the routine personal bankruptcy case.

There is no doubt that Kemp vs. Countrywide Home Loans was a spectacularly bungled defense — and its implications have caused an uproar in the world of mortgage securitizations.

In a series of unforced admissions, the B of A manager, Linda DeMartini, and Harold Kaplan, the company's outside attorney, described how Countrywide had failed to adhere to the most rudimentary of securitization procedures, such as transferring the original promissory note to the trusts that had purchased the loans, as required under the pooling and servicing agreement.

Both DeMartini and Kaplan said it was standard practice for Countrywide to hold onto the original mortgage notes, which were stored in Simi Valley, Calif., despite securitization contracts that require the notes be physically transferred to sponsors, trustees or custodians.

"I mean, there's no way I'm going to argue that there was a physical transfer," Kaplan told Chief Judge Judith Wizmur of the U.S. Bankruptcy Court in New Jersey, in an August 2009 hearing. "They had the documents."

Read on.