Bank of America Corp.  yesterday won dismissal of a lawsuit by investors who wanted the bank to buy back mortgage loans that underlie more than $1.06 billion of securities.

The case is tied to risky home loans issued by Countrywide Financial Corp, which Bank of America bought in 2008. The suit was brought by Walnut Place, a name used by the Baupost Group, a Boston-based hedge fund run by money manager Seth Klarman.

The New York judge who threw out the lawsuit is the same one who will decide whether to approve a proposed $8.5 billion settlement with virtually all investors who lost money on Countrywide mortgage-backed securities, including Walnut Place.

The suit "was premature," New York state Supreme Court Justice Barbara Kapnick wrote in her decision.

The judge pointed out that the proposed settlement includes the claims in Walnut Place’s suit. It covers Walnut Place’s trusts, along with 528 similar ones.

Like many investors in mortgage-backed securities before the mortgage crisis, Walnut Place claimed in its February 2011 lawsuit that Countywide made false representations about the characteristics and credit quality of loans underlying the securities.

Walnut Place said Charlotte, N.C.-based Bank of America refused its demand that it buy back the loans and that Bank of New York Mellon, the Countrywide securities trustee, who also was a defendant, "unreasonably failed" to sue the bank to repurchase the loans.

Walnut Place, which was not part of settlement talks but would be bound by the terms of the agreement, has complained the $8.5 billion payout was too low. (Reuters)