Bloomberg News is reporting that PIMCO, BlackRock Inc. (BLK) and the NY Fed are seeking to force Bank of America (BAC) to repurchase mortgage putbacks (guarantors or investors in MBS ask to return bad loans) packaged into $47 billion of bonds by its Countrywide Financial Corp.
According to Bberg, the bondholders wrote a letter to Bank of America and Bank of New York Mellon Corp. (BK), the debt’s trustee, citing alleged failures by Countrywide to service the loans properly.
From Bberg: “Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s. Last month, BNY Mellon declined to investigate mortgage files in response to a demand from the bondholder group, which has since expanded. Countrywide’s servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases by bypassing the trustee, said Kathy Patrick, their lawyer at Gibbs & Bruns LLP.
“We now are in a position where we have to start a clock ticking,” Patrick, who is based in Houston, said today in a telephone interview.”
MetLife Inc. (MET), the biggest U.S. life insurer, is part of the group represented by Gibbs & Bruns…TCW Group Inc., the manager of $110 billion in assets, expects to join BlackRock…and Pimco, which runs the biggest bond fund, in the group…
Countrywide also hasn’t met its contractual obligations as a servicer because it hasn’t asked for repurchases itself and is taking too long with foreclosures, either because of document or process mistakes or because it doesn’t have enough staff to evaluate borrowers for loan modifications, Patrick said. If the issues aren’t fixed within 60 days, BNY Mellon should declare Countrywide in default of its contracts, she said.”
BofA’s Chief Executive Officer Brian Moynihan said today his company will “defend [its] shareholders” by disputing any unjustified demands it buy back defective mortgages.
PIMCO offered “no comments” on report of BAC mortgage purchases.
BAC shares dropped 29 cents to $12.06 in reaction to the news.