David McLaughlin and Jody Shenn, Bloomberg
Bank of America Corp., the biggest U.S. bank by assets, was sued by investors in mortgage-backed bonds who are seeking to force the bank to buy back loans underlying their securities.
Bank of America’s Countrywide Financial unit breached representations and warranties about the loans, which it originated, the investors said in the complaint filed today in New York State Supreme Court in Manhattan.
“Each of these breaches of representations and warranties materially and adversely affected the interests of both the trust and plaintiffs in those mortgage loans,” they said.
The lawsuit against Bank of America was filed as defaults on mortgage loans soar and mortgage investors demand that banks buy back poorly performing loans. So-called mortgage putbacks may cost banks and lenders as much as $90 billion, JPMorgan bond analysts said in an October report.
A separate group of mortgage-bond investors is fighting with Bank of America over $47 billion of securities. The group, which includes Pacific Investment Management Co., MetLife Inc. and the Federal Reserve Bank of New York, said in October it was considering declaring Bank of America in default of its loan- servicing duties.
“There hasn’t been a lot of repurchase activity recently in terms of lawsuits being filed but there’s been a lot more activity going on behind the scenes with loan files being turned over and looked through,” Isaac Gradman, a San Francisco-based consultant and formerly a lawyer at Howard Rice Nemerovski Canady Falk & Rabkin, said today.
