Bank of America, which is trying to unfreeze its suspension of foreclosures, is now being threatened by investors, including the New York Fed, with possible legal action in the way it packaged mortgages into bonds.
The investors, who hold $16.5 billion of BofA mortgage bonds, took a step toward a possible suit against the bank, according to Reuters news service.
“The investors said that some mortgages should never have been included in the bonds in the first place, and that the Bank of America unit, Countrywide Home Loan Servicing, should force the original lender to buy them back,” said the article. “The salvo is the latest effort from investors to push losses from mortgage securities back onto banks that made the original loans. Investors say the loans did not meet the standards that bondholders were promised when they bought the securities. Countrywide Home Loan Servicing, now part of Bank of America, works on behalf of mortgage bond holders to collect payments on mortgages and work out bad loans.”
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