Joe Nocera in the NYTimes reports that the “Bank of America’s Foreclosure Mess Won’t Disappear Quickly“:
… The bank’s central position is that, since it is so doggone obvious that the homeowners can’t pay their mortgages, the fact that the affidavits might not have complied with the law shouldn’t cause anyone to break into a sweat. At one point Mr. Noski actually said, “I think it’s a big issue because people are losing homes. It’s not a big issue” for the servicers. Glad he cleared that up.
The prospect of a second legal assault is more recent. Shortly before the earnings call, Bank of America received a letter from a lawyer representing eight powerful institutional investors, including BlackRock, Pimco and — most amazing of all — the New York Federal Reserve. The letter was a not-so-veiled threat to sue the bank unless it agrees to buy back billions of dollars worth of loans that are in securitized mortgage bonds the investors own.
Mainly, they are saying that Bank of America was servicing loans in these bonds that the bank knew violated the underwriting standards that the investors had been led to believe the bank was conforming to. What’s more, they said, the bank had never come clean about all the bad loans, as it was required to do. Therefore, say the investors, the bank has a contractual obligation to buy back the bad loans.
During the conference call, Mr. Moynihan and Mr. Noski made it clear that Bank of America was going to use hand-to-hand combat to fight back these claims. “We’re protecting the shareholders’ money,” Mr. Moynihan said. Mr. Noski questioned whether the investors even had the right to bring the case. “We continue to review and assess the letter and have a number of questions about its content including whether these investors actually have standing to bring these claims,” he said.
So there you have it. Having convinced millions of Americans to buy homes they couldn’t afford, Bank of America is now revving up its foreclosure efforts on these same homeowners. At the same time, having sold tens of thousands of these same terrible loans to investors, it is going to spend tens of millions of dollars on lawyers to keep from having to buy back their junky loans.