Investors Seek to Force Bank of America to Buy Back Loans
Bloomberg has reported that investors in mortgage backed bonds have sued the largest U.S. bank, Bank of America Corporation, to force it to buy back loans underlying their securities. The Countrywide Financial unit of Bank of America is said to have made fraudulent representations and warranties about the loans it originated, according to the complaint file in New York State Supreme Court in Manhattan.
As defaults on mortgages continue to increase, so do the number of investor demands to buy back poorly performing loans. JP Morgan analysts have said that the buybacks could cost banks and lenders as much as $90 billion. In a separate action, Bank of America is fighting a $47 billion claim by Pacific Investment Management Company, MetLife, Inc. and the Federal Reserve Bank of New York.