Bank of America late Tuesday said it is "not responsible" for the "poor" performance of mortgages "as a result of a bad economy," and defended its role as a servicer on billions of dollars in outstanding home loans.
BofA's comments came as news reports broke Tuesday that the Federal Reserve Bank of New York, BlackRock Financial, PIMCO, MetLife, and other investors may sue the nation's largest servicer of loans unless it buys back a large swath of $47 billion in MBS.
This group of MBS investors wrote to BofA, and Bank of New York Mellon Corp. — the trustee on some of the securities — citing alleged failures by Countrywide Financial Corp. to service the loans properly.
Most of the MBS in question were issued by Countrywide Financial Corp., which BofA bought in August 2008.
BofA issued a statement saying, "We don't believe we've breached our obligations as servicer. We will examine every avenue to vigorously defend ourselves."
Bank of New York Mellon stressed the letter states a demand to Countrywide to address servicing concerns but it does not ask Bank of New York to take any action. Buybacks are only one of a list of possible remedies to specific covenants in 115 pooling and servicing agreements that RMBS holders allege Countrywide Servicing failed to perform, according to law firm Gibbs & Bruns.
Investors are able to have some say in servicing actions when they hold a certain percentage of voting rights in a deal—in this case the law firm said the investors involved hold over 25% of the voting rights in the more than $47 billion in Countrywide-issued RMBS involved. The law firm indicated more deals are involved in the current letter than in an earlier August letter along the same lines.
The Federal Reserve Bank of New York confirmed its participation in the investor group but would not otherwise comment. Some of the securities involved are said to be those in the New York Fed’s Maiden Lane portfolios from companies that had to be bailed out or merged during the crisis with the New York Fed’s help. BlackRock would not comment on whether it is part of the suit. PIMCO and MetLife had not returned calls for comment at press time.
To date, most of the largest buyback claims hitting seller/servicers have come from Fannie Mae and Freddie Mac. There also have been mortgage insurance coverage disputes between lenders and the nation's seven MI firms.
At Sept. 30, BofA had $6.8 billion in outstanding buyback claims from the GSEs — more than double the amount of 12 months earlier.