- Investors who sued over $351 billion in downgraded Countrywide Financial Corp. mortgage-backed securities after the 2007 subprime market collapse may have to settle for less than 1 percent of what they initially sought.U.S. District Senior Judge Mariana Pfaelzer in Los Angeles, who narrowed the case to $2.6 billion in bonds and dropped Countrywide parent Bank of America Corp. as a defendant, has gone further than other judges in scaling back such claims. Her rulings in April and May show the difficulty of trying to hold banks liable for billions of dollars in debt downgraded to junk.

“The recent court rulings provide encouragement for Countrywide and Bank of America and could indicate that the courts would limit or reduce the number of claims in these cases or perhaps dismiss them in their entirety,” said Patrick McManemin, a lawyer with Patton Boggs LLP in Dallas who has worked on both sides of mortgage-securities cases and isn’t involved in the Los Angeles litigation.

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