US District Judge rejects Countrywide's appeal

US District Judge Richard J. Howell in Manhattan, in a ruling Tuesday, sent the case, seeking class-action status, back to New York State Supreme Court, where it was originally filed in December. 

Howell, thus, declined a bid by Countrywide Financial Corp. to have a lawsuit over its plans to make billions of dollars in loan modifications heard in federal court. Countrywide had sustained that the federal court was the proper venue, as the lawsuit and raised "substantial, disputed federal questions" under the Truth-in-Lending Act. 

In his decision the judge said "Although defendants deny it, by arguing that TILA requires a different interpretation of the contract, defendants are raising a federal defense, a federal defense has never been sufficient for federal question jurisdiction." 

Countrywide is required to purchase any loan where it agrees to cut payments under the pooling and servicing agreements, as the lawsuit is seeking a declaratory judgment.