Investment firms, New York Fed demand Bank of America buy back mortgages: which crooks will win?

[Hannah Bell]

Some of the most powerful Wall Street investment firms, together with the New York Federal Reserve Bank, on Tuesday took the initial step toward launching legal proceedings aimed at forcing Bank of America to buy back as much as $47 billion in mortgage-backed securities.

The investors, who together control 25 percent of the voting rights for the securities, say that Countrywide Financial, now owed by Bank of America, misrepresented the quality of the securities when it sold them. They further claim that Countrywide has not made good on its obligations to the debt holders by taking too long to foreclose on properties and failing to keep proper records.

The investors’ group includes the bond giant Pimco and the investment management firm BlackRock...
The law firm for the investment companies and the New York Fed, Gibbs & Bruns LLP, sent the Bank of America a “notice of nonperformance” concerning $47 billion in residential mortgage-backed securities issued by Countrywide prior to the mortgage meltdown. The issuing of the letter gives Bank of America 60 days to redress the group’s grievances before the group presses on with a lawsuit. The letter “begins the clock ticking” on legal action, according to Kathy Patrick, a partner at the law firm.

Bank of America rejected the charges Tuesday morning, saying, “We’re not responsible for the poor performance of loans as a result of a bad economy. We don’t believe we’ve breached our obligations as servicer.” The company said that it will “vigorously defend” itself against the allegations.

The issue boils down to a dispute between the issuers of mortgage-backed securities—who made huge amounts of money by re-selling dubious mortgages as securities—and the financial companies that bought the bonds. At the height of the real estate bubble, companies like Pimco were as happy to buy subprime mortgage-backed debt as companies like Countrywide were to issue it.

But now that real estate values have collapsed, foreclosures continue to mount and mortgage-backed securities have lost most of their value, the companies are fighting among themselves over who is going to absorb the losses.

http://www.wsws.org/articles/2010/oct2010/bank-o21.shtml

[aquart]

1. Since I already know I'll lose, I'm going to sit back and watch the cannibals gnaw.

[datan]

3. just fyi

lots of investors in these mortgage backed securities are pension funds and the like.

[aquart]

8. I said I knew I'd lose. Foregone conclusion.

[Waiting For Everyman]

2. Awww... too bad. Those intra-richie spats can get ugly.

:popcorn:

Seriously, I welcome this because it brings us one step closer to the possibility of meaningful prosecutions for the economic fiasco.

Every time somebody sues, more info comes out. I feel critical mass coming not too far away.

[tridim]

4. I think tomorrow is going to be a very interesting day.

Watch the markets, and watch out for propaganda from the banks.

[Hassin Bin Sober]

5. I personally know someone responsible for probably 100 million plus of those bad loans.

I worked with her before she left to join Wells Fargo.

Wells Fargo fired her for fraud so she found a home at Countrywide.

Countrywide gave her her own branch, processing team and underwriting team. In other words, SHE was the branch. Her production increased from 30 million a year to 100+ million ... until it all unwound on her. Turns out she was inventing employment for people - not inflating income. Inventing employers. Doctoring condo high-rise approval. Need to close a deal in a non-conforming development? No problem. Doctor the approval.

When Countrywide finally fired her there were literally rooms full of fucked up fraudulated files left for Countrywide to clean up.

I heard the FBI paid her a visit.

She must have a good lawyer (why not when you were earning $3+ million a year) because you can now see her mug plastered all over the Chicago Real estate mags - she works for National City.

[datan]

7. cool

they should get her deposed

[Hassin Bin Sober]

13. Oh I'm sure she's been deposed and interviewed by the FBI.

When you steal, make sure you steal enough to hire good lawyers.

[laughingliberal]

6. Oh, boy! Some real backtracking here:

<Bank of America rejected the charges Tuesday morning, saying, “We’re not responsible for the poor performance of loans as a result of a bad economy. >

Funny. It wasn't long ago the bad performance of the loans was 'those deadbeats who bought more house than they could afford and deserved to lose their homes.' Now the loans are performing badly because of the bad economy.

#1: The crisis was always about the bad economy. Businesses were feeling the pinch here in '06. People who bought houses they could afford were finding them unaffordable as income began to decline.

#2: BofA and the other players and their casino approach to banking are the culprits behind the bad economy.

[aquart]

9. I thought they created the crap economy with their rapacious greed.

Am I misinformed?

[laughingliberal]

11. You are not misinformed. Don't expect them to admit it, though. nt

[maryf]

10. K&R nt

[Romulox]

12. If BAC loses, it just means the taxpayer will have to pay (TARP II!)

"The investors, who together control 25 percent of the voting rights for the securities, say that Countrywide Financial, now owed by Bank of America, misrepresented the quality of the securities when it sold them."

Gimmeabreak. As if the "rapacious greed" wasn't also in the hearts of the purchasers. There's no scam invented that doesn't work on a marks a) greed; b) pity (and 9 times out of 10, it's a). ) This is ultimately a backdoor attempt to extort money from the taxpayer, as it is clear that we the taxpayer, not BAC's assets, are the ultimate guarantors of its debts.

[TBF]

14. So glad we moved our accounts to a smaller bank & credit union. nt