Mortgage investors put pressure on Bank of America

* Investors move a step closer to suing B of A

* Bank accused of improper mortgage servicing

By Al Yoon

NEW YORK, Oct 19 (BestGrowthStock) – A group of investors holding
$16.5 billion of mortgage bonds took a step toward a possible
suit against a Bank of America Corp (BAC.N: ) unit for failing to
correctly handle loans that were packaged into bonds.

The investors said that some mortgages should never have
been included in the bonds in the first place, and that the
Bank of America unit, Countrywide Home Loan Servicing, should
force the original lender to buy them back.

The salvo is the latest effort from investors to push
losses from mortgage securities back onto banks that made the
original loans. Investors say the loans did not meet the
standards that bondholders were promised when they bought the

Countrywide Home Loan Servicing, now part of Bank of
America, works on behalf of mortgage bond holders to collect
payments on mortgages and work out bad loans.

The bondholders have issued a “notice of nonperformance,”
which gives Countrywide 60 days to fix the problems. If it does
not, the investors can declare “an event of default,” — a
technical violation of the terms of the bond, said Kathy
Patrick, a partner at Gibbs & Bruns LLP representing the

After an event of default, investors can sue.

On a conference call with investors, Bank of America CFO
Charles Noski said the bank has received the letter and is
reviewing the allegations.

It is not clear how successful efforts will be for mortgage
bonds that were not guaranteed by Fannie Mae or Freddie Mac,
analysts at JPMorgan said late last week.

Investors seeking redress have to establish a number of
facts, including that they were hurt by the failure of the
loans to meet the proper underwriting standards. That may be
difficult, the JPMorgan analysts said.

This group of investors also said Countrywide failed to
keep accurate loan records, a widespread problem in the
industry that prevents investors from knowing how well loans
are really performing.

Patrick said they hold more than 25 percent of the voting
rights of some $47 billion of mortgage-backed securities, the
minimum sign-on required for a notice of nonperformance.
(Editing by Jackie Frank)

Mortgage investors put pressure on Bank of America