UPDATE: Bank Of America Rebuffs Mortgage Letter From Investors
October 19 2010 - 5:32PM
Dow Jones News
Bank of America Corp. (BAC) said Tuesday it will "vigorously
defend" itself against demands in a letter from a group of
investors that it take back billions of dollars in failing
mortgages originally issued by the Charlotte bank's Countrywide
subsidiary.
Those investors include government-sponsored mortgage company
Freddie Mac (FMCC), according to two people familiar with the
matter, and the Federal Reserve Bank of New York, according to a
person familar with the matter.
Bank of America said in a statement, "We're not responsible for
the poor performance of loans as a result of a bad economy. We
don't believe we've breached our obligations as servicer. We will
examine every avenue to vigorously defend ourselves."
BlackRock Inc. (BLK) is also an investor challenging Bank of
America, according to a person familiar with the matter. Another
person familiar with the situation said Pacific Investment
Management Co., or Pimco, a unit of Allianz SE (ALV.XE, AZSEY), is
also one of the investors behind the letter.
The inclusion of Freddie Mac is notable because it and fellow
government-controlled mortgage company Fannie Mae (FNMA) have
already filed billions of dollars in claims over mortgages that
Bank of America originated and sold directly to the agencies. Bank
of America has set aside billions to pay such claims.
Freddie Mac was among the most active buyers of mortgage-backed
securities that weren't backed by government entities during the
housing boom. The company bought $121 billion in private-label
securities in 2004, $179 billion in 2005 and $122 billion in
2006.
Shares in Bank of America spiraled downward Tuesday afternoon
after names of some investors behind the letter surfaced. They
closed down 4.4% to $11.80.
Bank of America bought Countrywide Financial Corp. in 2008
during the depths of the financial crisis. The New York Fed
inherited its positions in the Countrywide securities through its
2008 rescues of Bear Stearns Cos. and American International Group
Inc. (AIG).
-By Marshall Eckblad, Dow Jones Newswires; 212-416-2156;
marshall.eckblad@dowjones.com
(Matthias Rieker and Nick Timiraos contributed to this
report.)