Countrywide Financial Corp.'s legal settlement last month, which requires it to relax the terms of some 400,000 mortgages, was good news for struggling homeowners. But a New York law firm says the settlement isn't fair to the people who invested in Countrywide's mortgage-backed securities, and it's trying to drum up interest in challenging the settlement.

That has some consumer advocates and lawmakers who pushed for the loan workouts up in arms, saying their work will be unraveled and that homeowners will be caught in the cross-fire. But some of the investors, who have already suffered substantial losses due to the withering housing market, say they could lose even more if those mortgages are renegotiated.

Successful or not, the potential lawsuit is a reminder that fixing the mortgage meltdown will be as complicated as the web of investors, securitizers and second-mortgage lenders holding stakes in most every mortgage. The law firm, Grais & Ellsworth, will hold a meeting this morning for securities investors interested in taking legal action against Countrywide and its parent, Charlotte's Bank of America Corp.

Bank of America Corp. bought Countrywide, a California mortgage lender known for exotic loans, this summer. Countrywide had been sued by North Carolina and other states that alleged it had practiced predatory lending. Last month, Bank of America settled those suits by agreeing to $8.4 billion worth of mortgage modifications, also called loan workouts, which can help struggling borrowers avoid foreclosure with measures such as reducing their interest rate or waiving late fees.

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