The lawsuit was filed on Monday in a New York state court by 12 plaintiffs including the TIAA-CREF fund family, New York Life Insurance Co and Dexia Holdings Inc.
According to the complaint, the investors bought hundreds of millions of dollars of Countrywide securities from 2005 to 2007 that they thought were "conservative, low-risk investments."
The investors said Countrywide misrepresented the securities' safety in offering documents and elsewhere, and compromised their investments by ignoring its underwriting guidelines.
As a result, the complaint said, most of the securities now carry "junk" credit ratings rather than the "triple-A" ratings they once had, resulting in "significant losses."
The plaintiffs want compensatory and punitive damages.
Bank of America spokeswoman Shirley Norton said in a statement that the lender would review the lawsuit, "but on first glance these sound like large, sophisticated investors who now want to blame someone for the fact that the declining economy caused their investment to lose value."
Other defendants include several former Countrywide officials, including longtime chief executive Angelo Mozilo.
David Siegel, a lawyer for Mozilo, said the lawsuit has no basis in law or fact.
"We expect to prevail against these plaintiffs as we have against other sophisticated MBS investors," Siegel said.
Mozilo agreed in October to a USD67.5 million settlement of a US Securities and Exchange Commission civil fraud lawsuit accusing him of misleading investors.
Countrywide had been the largest US mortgage lender before it was bought in 2008 by Bank of America.
In the fourth quarter of 2010, Bank of America took a USD2 billion writedown on Countrywide. It also set aside USD4.1 billion for legal costs tied to home loans it is buying or is likely to buy back from investors.
The insurer Allstate Corp sued Bank of America last month over the alleged misrepresentation of risks on more than USD700 million of mortgage debt it bought from Countrywide.
The case is Dexia Holdings Inc et al v. Countrywide Financial Corp et al, New York State Supreme Court, New York County, No. 650185/2011.