ProgramBusiness
 
  


  1. News Articles
  2. Related News Articles
  3. Comments
News Article Details

U.S. Bancorp Sues BofA over Mortgage-Backed Loans

Source: WSJ - David Benoit


Posted on 31 Aug 2011

Facebook LinkedIn Twitter Google

U.S. Bancorp, acting as a trustee for mortgage-bond investors, sued Bank of America Corp. over $1.75 billion in mortgage-backed loans that went bad at an allegedly rapid clip.

U.S. Bancorp alleged in the lawsuit, filed in New York state court Tuesday, that Countrywide Financial Corp., which Bank of America bought in 2008, willfully failed to abide by the contract terms of the mortgage-bond creation. The trustee sampled 786 loans in the pool and found that 66% of the loans, with a balance of $157 million, breached one or more of the terms of the contract. The entire trust, created in 2005, was backed by nearly 4,500 mortgages originated at Countrywide.

The trustee demanded that Bank of America repurchase the loans because of the so-called breach of representations and warranties, but the bank refused, the lawsuit says.

The trustee demands in the lawsuit that Bank of America repurchase all the loans within the trust, which it says the contract obligated the bank to do.

A Bank of America spokesman said the bank was reviewing the complaint but didn't have comment yet. A spokesman for U.S. Bancorp said the bank filed only as a trustee and wasn't going to comment further on litigation.

Bank of America has faced dozens of lawsuits from investors in mortgage-backed securities, each using different tactics to try and recoup some of the losses the investments took after the housing bubble burst. The bank has said it would fight suits from individual private investors that it felt didn't have the contractual right to demand compensation.

But few trustees, which in the mortgage-bond contracts are those with the power to demand compensation, have filed lawsuits seeking investor returns.

Bank of America did reach an agreement to settle with a group of investors represented by trustee Bank of New York Mellon Corp. for $8.5 billion in late June. That settlement, however, has come under fire from some investors and the attorney general for New York, and will need a judge's ruling before moving forward.


Comments

Post a Comment
If you are a Storefront / Tradingfloor user, click here to login.
Note: As a guest user, please fill out the form below to post a comment.
Post your comments here.
Name :
Email Address :
Captcha :
Comments :
Character left : 2000