What makes this a big deal is just who is writing this.
Pacific Investment Management Co. [PIMCO], BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said.Bank of America responded that it would, "defend its shareholders," which might make for an interesting conflict between two groups of too big to fail financial institutions.
A group of bondholders wrote a letter to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service loans properly, their lawyer said yesterday in a statement that didn’t name the firms. The New York Fed acquired mortgage debt through its 2008 rescues of Bear Stearns Cos. and American International Group Inc.
In either case, it makes Congressional Deus Ex Machina hail Mary play less likely, since the constituencies that normally
My guess is that this is actually not as big a deal as it sounds.
I agree with Yves Smith, that this is primarily posturing:
- This is not litigation, it's just a nastygram that was release.
- The claim appears to be an extension of a claim against trusts.
- They are claiming that the lack of due diligence was because the former Countrywide is not going after Countrywide, that sold the loan.
- That BoA/Contrywide has been too slow in forclosing. (!?!)
The full press release from the bond holders is below the fold:
Institutional Holders of Countrywide-Issued RMBS Issue Notice of Non-Performance Identifying Alleged Failures by Master Servicer to Perform Covenants and Agreements in More Than $47 Billion of Countrywide-Issued RMBS
Oct. 18 /PRNewswire/ --Today, the holders of over 25% of the Voting Rights in more than $47 billion of Countrywide-issued RMBS sent a Notice of Non-Performance (Notice) to Countrywide Home Loan Servicing, as Master Servicer ("Countrywide Servicing"), and to Bank of New York, as Trustee, identifying specific covenants in 115 Pooling and Servicing Agreements (PSAs) that the Holders allege Countrywide Servicing has failed to perform.
The Holders' Notice alleges that each of these failures has materially affected the rights of the Certificateholders under the relevant PSAs. Under Section 7.01 of the PSAs, if any of the cited failures "continues unremedied for a period of 60 days after the date on which written notice of such failure has been given ... to the Master Servicer and the Trustee by the Holders of Certificates evidencing not less than 25% of the Voting Rights evidenced by the Certificates," that failure constitutes an Event of Default under the PSAs.
In a previous release, the Holders emphasized their intent to invoke all contractual remedies available to them to recover their losses and to protect their rights. Kathy Patrick of Gibbs & Bruns LLP, lead counsel for the Holders, emphasized that the Holders' notice does not seek to halt loan modifications for troubled borrowers. Instead, it urges the Trustee to enforce Countrywide Servicing's obligations to service loans prudently by maintaining accurate loan records, demanding the repurchase of loans that were originated in violation of underwriting guidelines, and compelling the sellers of ineligible or predatory mortgages to bear the costs of modifying them for homeowners or repurchasing them from the Trusts' collateral pools.
Patrick also noted that the group of Holders that tendered today's Notice of Non-Performance is larger, and encompasses more Countrywide-issued RMBS deals, than were included in the August 20 instruction letter. When asked why the group of holders was larger, Patrick replied, "Ours is a large, determined, and cohesive group of bondholders. We have a clearly defined strategy. We plan to vigorously pursue this initiative to enforce Holders' rights."
The Notice of Non-Performance, which is the first step in the process of declaring an Event of Default, was issued on behalf of Holders in the following Countrywide-issued RMBS:SOURCE Gibbs & Bruns, LLP
Deal Name Deal Name Deal Name CWALT 2004-32CB CWHL 2004-22 CWL 2006-15 CWALT 2004-6CB CWHL 2004-25 CWL 2006-16 CWALT 2004-J1 CWHL 2004-29 CWL 2006-19 CWALT 2005-14 CWHL 2004-HYB9 CWL 2006-2 CWALT 2005-21CB CWHL 2005-11 CWL 2006-20 CWALT 2005-24 CWHL 2005-14 CWL 2006-22 CWALT 2005-32T1 CWHL 2005-18 CWL 2006-24 CWALT 2005-35CB CWHL 2005-19 CWL 2006-25 CWALT 2005-36 CWHL 2005-2 CWL 2006-26 CWALT 2005-44 CWHL 2005-3 CWL 2006-3 CWALT 2005-45 CWHL 2005-30 CWL 2006-5 CWALT 2005-56 CWHL 2005-9 CWL 2006-7 CWALT 2005-57 CB CWHL 2005-HYB3 CWL 2006-9 CWALT 2005-64 CB CWHL 2005-HYB9 CWL 2006-BC2 CWALT 2005-72 CWHL 2005-R3 CWL 2006-BC3 CWALT 2005-73CB CWHL 2006-9 CWL 2006-BC4 CWALT 2005-74T1 CWHL 2006-HYB2 CWL 2006-BC5 CWALT 2005-81 CWHL 2006-HYB5 CWL 2006-SD1 CWALT 2005-AR1 CWHL 2006-J2 CWL 2006-SD3 CWALT 2005-J5 CWHL 2006-OA5 CWL 2006-SD4 CWALT 2005-J9 CWHL 2006-R2 CWL 2006-SPS2 CWALT 2006-14CB CWHL 2007-12 CWL 2007-2 CWALT 2006-20CB CWHL 2007-16 CWL 2007-5 CWALT 2006-37R CWHL 2008-3R CWL 2007-6 CWALT 2006-41CB CWL 2005-10 CWL 2007-7 CWALT 2006-HY12 CWL 2005-11 CWL 2007-9 CWALT 2006-OA11 CWL 2005-13 CWL 2007-BC1 CWALT 2006-OA16 CWL 2005-16 CWL 2007-BC2 CWALT 2006-OA17 CWL 2005-2 CWL 2007-BC3 CWALT 2006-OA6 CWL 2005-4 CWL 2007-QH1 CWALT 2006-OA9 CWL 2005-5 CWL 2007-S3 CWALT 2006-OC10 CWL 2005-6 CWALT 2006-OC2 CWL 2005-7 CWALT 2006-OC4 CWL 2005-8 CWALT 2006-OC5 CWL 2005-9 CWALT 2006-OC6 CWL 2005-AB2 CWALT 2006-OC7 CWL 2005-AB3 CWALT 2007-17CB CWL 2005-AB4 CWALT 2007-23CB CWL 2005-BC5 CWALT 2007-24 CWL 2005-IM1 CWALT 2007-OA7 CWL 2006-10 CWALT 2008-2R CWL 2006-12
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