Institutional holders of more than $47 billion of residential mortgage-backed securities (RMBS) are pressuring Bank of America to repurchase loans, claiming the bank's Countrywide subsidiary has failed in its role as master servicer.
The investor group, which holds more than 25% of the voting rights in the Countrywide-issued RMBS, includes the New York Fed, PIMCO and Blackrock Investment Management, among others, according to a copy of the ‘notice of nonperformance’ that was reposted on BusinessInsider.com.
The notice, which was sent to Countrywide Home Loan Servicing and trustee Bank of New York, identifies covenants in 115 pooling and servicing agreements (PSAs) that the investors say Countrywide failed to perform. The alleged failures have materially affected the investors' rights under the PSAs, according to the investors' lead counsel, Gibbs & Bruns LLP attorney Kathy Patrick.
‘Ours is a large, determined and cohesive group of bond holders,’ says Patrick. ‘We have a clearly defined strategy. We plan to vigorously pursue this initiative to enforce holders' rights."
Among Countrywide's failures, the investors claim, is that the company has kept defaulted mortgages on its books, rather than foreclose or liquidate them, to maximize its servicing fee. The investors, citing a previous settlement between Countrywide and various state attorneys general, also argue they should not bear the costs of reworking predatory loans.
According to the Gibbs & Bruns statement, the notice of nonperformance urges Bank of New York to enforce Countrywide's obligations to ‘service loans prudently by maintaining accurate loan records, demanding the repurchase of loans that were originated in violation of underwriting guidelines, and compelling the sellers of ineligible or predatory mortgages to bear the costs of modifying them for homeowners or repurchasing them from the trusts' collateral pools.’