Bank Of America Sued By Trustee Of $1.75 Billion Mortgage Pool

(Jonathan Stempel and Joe Rauch) - Bank of America Corp was sued by the trustee of a $1.75 billion mortgage pool, which seeks to force the bank to buy back the underlying loans because of alleged misrepresentations in how they were made.

The lawsuit by the banking unit of US Bancorp is the latest of a slew of litigation to recover investor losses tied to risky mortgage loans issued by Countrywide Financial Corp, which Bank of America bought in 2008.

In a complaint filed in a New York state court in Manhattan, U.S. Bank said Countrywide, which issued the 4,484 loans in the HarborView Mortgage Loan Trust 2005-10, materially breached its obligations by systemically misrepresenting the quality of its underwriting and loan documentation.

Soon after the loans were sold to the trust, they "began to become delinquent and default at a startling rate," the complaint said. Out of a sample of 786 of the loans, 520, or 66 percent, breached one or more representations, it said.

U.S. Bank said it demanded that Bank of America fix the breaches or buy back the loans as it had agreed to do, but that it has refused and offered no reason for this refusal.

The lawsuit demands that the bank repurchase all the loans in the pool, or at least those it knows have problems and are hurting investors in the trust.

Bank of America was not immediately available for comment.

The Charlotte, North Carolina-based bank paid $2.5 billion to buy Countrywide, but writedowns and legal costs have pushed the estimated cost of that purchase to more than $30 billion.

Last fall, Chief Executive Brian Moynihan said the bank would fight repurchase claims by investors, calling the process "hand-to-hand combat."

In 2011, however, he has agreed to large settlements with mortgage financiers Fannie Mae and Freddie Mac, as well as billionaire Wilbur Ross' bond insurer Assured Guaranty Ltd. Then in June, he agreed to pay $8.5 billion to settle a wide range of Countrywide claims.

The $8.5 billion pact requires court approval but has drawn objections from several dozen investors, as well as the Federal Deposit Insurance Corp and the New York and Delaware attorneys general. Bank of America also faces a $10 billion lawsuit by bailed-out insurer American International Group Inc.

In early afternoon trading, Bank of America shares were down 19 cents, or 2.3 percent, to $8.20 on the New York Stock Exchange.

The case is U.S. Bank NA v. Countrywide Home Loans Inc et al, New York State Supreme Court, New York County, No. 652388/2011.

(Reporting by Jonathan Stempel and Joe Rauch; Editing by Derek Caney and Tim Dobbyn)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[LoyalDem4646]

04:13 AM on 09/01/2011

BofA is a corrupt corporation and therefore deserves whatever it gets.

[El Chingaso]

01:13 PM on 08/31/2011

BoA = dumber than a box of rocks. Of course, BoA management is pretty slick at "dreaming up" the most imaginative fees...

[shadow013]

11:59 PM on 08/30/2011

Bankers are supposed to be financially educated. They are supposed to know how to crunch numbers. I still can't understand why BofA did not perform a real analysis on Countrywide before taking them over. Who forced the CEO to acquire a load of IED's?

[tbryant80]

08:14 PM on 08/30/2011

NV just stuck BofA as well... http://4closurefraud.org/2011/08/30/amended-complaint-nevada-wallops-bank-of-america-with-sweeping-suit-nation-wide-foreclosure-settlement-in-peril/#comment-73837

[msbeal]

04:36 PM on 08/30/2011

BofA buying Countrywide has got to be the biggest business b0ner in the history of business b0ners. I do believe that CEO is no longer with BofA.

[Jim Marusak]

04:59 PM on 08/30/2011

countrywide should have been liquidated when it went up in smoke instead of BoA buying them. anyone at that time who says otherwise should lose their executive seat.

[tbryant80]

08:13 PM on 08/30/2011

Warren Buffett's investment in BofA will end up running a close second.

[shadow013]

08:14 AM on 08/31/2011

Unless he got some sweet deal we don't know about as an Obama crony. To some it looked as though Buffett was trying to bail out BofA by buying preferred stock so others would follow and buy common. Remember that Buffett profited when he owned rating agency stock as the agency was rubber stamping toxic with AAA. Buffett sold those shares before the full extent of Moody's and S&P's complicity in bubble building became known.

[Kenz300]

04:28 PM on 08/30/2011

Banks need to process short sales instead of slow walking the process.

I have heard stories of people waiting 6 months or longer to hear from a bank if a short sale was accepted. They need to move these sales along and get the home in the hands of a qualified owner. THat will help the old owner get out from under their debt and it will start moving the back log of houses from the market. Banks need to do more to solve this problem.

[shadow013]

11:54 PM on 08/30/2011

Multiple reasons a short sale might be slow. One is that they can't find the paperwork, can't prove they hold mortgage. That's what robosigning and forgery are for, making up paperwork from scratch.
May be because they make more if they foreclose. When failing banks were taken oven, the FDIC would incentivize. So if a bank bought out another one for 30 cents on the dollar, FDIC might agree to make sure the take over bank got full face value of the loan or a substantial percentage. If the bank paid $30,000, and forecloses, sells the house at $40,000, and FDIC gives bank another $40,000, what's the point of short sale or modification? Or even waiting for total repayment when a quick profit can be made.

[KIampfbeobachter]

04:10 PM on 08/30/2011

To Big to go Down! To many skeletons in the basement.

[GetRealSoon]

04:02 PM on 08/30/2011

So what do the victimized borrowers get? I know. Kicked to the curb.

[jsrl317]

03:01 PM on 08/30/2011

This bank is going down and down hard. Anyone who has a loan with them, should sue them. You might be surprised at your new leverage.

[NunyaBus99]

06:26 PM on 08/30/2011

While that sounds like fun, one would need a cause of action to sue. Having a loan wouldn't be enough even with all these lawsuits. I have a fixed loan with them but other than being slightly underwater because of the market my cause of action is zilch. Believe me, i wish there was a legitimate cause.

[jsrl317]

07:17 PM on 08/30/2011

It's not fun, I'm deadly serious. If lawyer can find cause, you can sue. They bought a bunch of crap paper from Countrywide. practically everyone who has one of those loans, and has their loans handled by MERS has standing. Go talk to an attorney, save your house, and even make them come to the table to renegotiate the entire terms of the loan. These people are accelerating foreclosures. you CAN stop them. Do yourt research and STAY AWAY from flat fee con-artists legal firms. Good luck!

[shadow013]

08:15 AM on 08/31/2011

Do you know who owns your loan? Is chain of title broken? Will you get clear title when you pay it off?