The Federal Reserve Bank of New York has rallied behind a group of large investors who are demanding that Bank of America repurchase those mortgage securities that are beleaguered with shoddy documentation and lending standards.
The securities are worth billions of dollars and the group of irritated investors may file a lawsuit against Bank of America if the latter refuses to comply with their demand. Bank of America Chief Executive Brian Moynihan dismissed the speculations saying the bank doesn't see the issues that people are worried about.
The New York Fed has an investment of about$16 billion in mortgage securities after it acquired them after bailing out American International Group.
Investors are mostly concerned about the affiliates of Countrywide Financial, which was acquired by Bank of America in 2008. There are reports that the affiliates failed to service 115 pools of loans although they had promised that to investors, who later went on to buy a major chunk of $47 billion worth of mortgage loans.
The investors include Blackrock, Prudential Financial, MetLife, New York Fed, and Pimco, among others. These investors are worried that Bank of America and other lenders have failed to keep accurate paperwork on the loans that are currently under investigation by the attorneys general of all 50 states.
Bank of America suspended foreclosure sales Oct. 8 to reassess its paperwork but since has given green signal to foreclosures in 23 states where judge approval is required for completion of deals. The company reported a loss of $7.3 billion on Tuesday for the quarter ending Sept. 30.
