BofA Folding Under Investor Pressure

EDITOR’S COMMENT: Same old tactic. Denial, in your face intimidation and then when there is nowhere else to go, they fold. This time with investors, but I’ve received information on the same story dozens of times by attorneys for borrowers who settled under confidentiality. The moral of the story is don’t get demoralized by their stone-walling. Persevere.

By DAN FITZPATRICK,

Wall Street Journal

Bank of America Corp., after vowing to fight requests that it repurchase certain loans, has begun potential settlement discussions with some of its largest mortgage investors.

The 17-member group now in talks with the nation’s largest bank as measured by assets includes the Federal Reserve Bank of New York, government-owned mortgage company Freddie Mac, BlackRock Inc., and Allianz SE’s Pacific Investment Management Co., or Pimco.

ReutersCEO Brian Moynihan had said BofA would engage in “hand to hand” combat on mortgage repurchase requests.

BOFA_jpm

BOFA_jpm

The bank’s approach with this group appears to signal a change in tone for Chief Executive Brian Moynihan, who in November pledged to engage in “day-to-day, hand-to-hand combat” on investor requests to repurchase flawed mortgages made before the U.S. housing collapse.

Bank spokesman James Mahoney said the decision to engage in talks with the investor group isn’t inconsistent with Mr. Moynihan’s previous approach.

“Our strategy hasn’t changed,” he said. “For both Bank of America and the investors, resolving these issues quickly is in everybody’s interest. Whether resolution comes through a protracted process or it can be expedited, time will tell.”

The investors, some of whom are acting on behalf of clients, sent a letter in October alleging that a Bank of America unit didn’t properly service 115 bond deals comprised of residential mortgages. It gave the bank 60 days to respond.

The disclosure of the letter sent Bank of America’s stock tumbling 4.4% on Oct. 19, as investors grappled with concerns that the bank could be overwhelmed with such investor requests. The group has since expanded and now includes 17 investors and 167 bond deals.

“Our clients are obviously very pleased that we’ve been able to open this dialogue and we hope to move it forward in a constructive direction,” said Kathy Patrick, an attorney for the bondholders. Ms. Patrick said that the initial extension in the time period for negotiations will be through Jan. 30, “but it can obviously be extended if the discussions are productive.”

The talks could still fall apart but the conversations are an attempt by the bank to put the matter behind it, said people familiar with the situation.

No U.S. bank is more vulnerable to an array of political and financial threats posed by home-lending woes. Bank of America has more repurchase requests than any of its rivals. It services one of every five U.S. mortgages, many of them from Bank of America’s acquisition of lender Countrywide Financial Corp. in 2008.

“The goal Brian laid out is to put the Countrywide issues behind us as quickly as possible and in the best interests of the shareholders,” bank spokesman Mr. Mahoney said.

Total new mortgage repurchase claims amounted to $12.8 billion at the end of the third quarter, up from $7.5 billion in the year-ago quarter. The bank has set aside $4.4 billion in reserves for these put back attempts.

Mr. Moynihan told analysts Oct. 19 he wasn’t interested in a large lump sum payment to make the repurchase issue go away.

“We’re not going to put this behind us to make us feel good,” he said. “We’re going to make sure that we’ll pay when due but not just do a settlement to move the matter behind us.”

—Ruth Simon
contributed to this article.

Write to Dan Fitzpatrick at dan.fitzpatrick@wsj.com

29 Responses

  1. SUBJECT : CREDITORS AND BANKS VS CERTIFICATE HOLDERS.

    COMMENTS: they know they cannot hide from “investors” in pass-through securities — who BY THE WAY — ARE NOT YOUR CREDITOR. The Bank is your creditor —

    M.Soliman:
    1. Borrower: is a debtor
    2. Bank: is an Obligor
    3. Trustee: Represents the Obligee.
    4. Investors: Are DEPOSITORS
    5. Security: is stock certificates
    6. Collateral: Depositor Term Deposit Accounts

    *** CREDITORS – QSPE ***

    Depositors are entitled to the payments shown on their debt instruments, i.e. CDO’s.
    Just like a CD has a yield.

    Note : When the Fed closed the doors of the biggest thrifts in America they 1) Became the Obligor and 2) Claimed funds held on depsoit 3) Disclosed the areno longer Obligor and the Receiver is the DEPSITOR…

    Its called “Siezure” Black Gold, Texas “T” . . .
    “F*O*R*F*I*E*T*U*R*E*
    (Next thing ya know Ol Jed’s a Millionaire).

    Before the “lotto” winners or Fed became indebted to any one investor it told the Cert Holder “Sail Pest” , “Be gone from my site”. In steps Soros, Gates, etc etc (I won’t get started).

    These creditors otherwise are entitled to the remaining assets as in DEPSOITS ACCOUNTS, in a liquidation. Not these guys… Need proof.

    The second and last year of the NOL comes to an end midnight 2010. Obama Tax credits in exchange for the lost investments places the FDIC in the role (now) of a “subrogor” And your Debt Collectors are “subrogation claims” agents working for the Fed ….AND … AND ….

    WHERE THE HELL DO MORTGAGES FIT INTO THIS MESS. Exactly my point!

    THEY DON’T GET IT? It’s a run on the bank and bank failure that caused this nightmare! Wake Up smell the Coffee.

    POST COMMENTS – This is huge Counsel – prepare you pleading carefully This is not a economic crisis driven by mortgages. This is a bank crisis and Wall Street crisis and far less a
    HOUSING OR FORECLOSURE CRISIS.

    MSoliman
    expert.witness@live.com

  2. ISSUES: Note never lawfully entered the Trust

    COMMENTS: “If Garfield’s arguments about the assignment to the Trust after closing means that the loan and note never lawfully entered the Trust, and that this is such a compelling argument, then why are the attorneys for the investors not using this argument?

    MSoliman: Note never lawfully entered the Trust versus what ? Lawfully.Judicially? Stuatorily? Come on !

    Dual consideration prohibits the note from succeeding the registered securities. The securities acts in place of the collateral upon its registration with MERS. If the note and assignment were properly assigned (not lawfully) they would not register it with MERS.

    If you own a note and record an assignement evidencing the successors and assigns – where are you going to sell it? On Craiglist ?

    A note registered with MERS becomes divested of its value and is a nominal instrument. As if it were PAID IN FULL (Hint Hint) . Upon registration with MERS it become marketable into a “waterfall” of stock certifcate in a registration.

    In private lable you cannot refinance a note or sell a home untill you DELETE the orginal registered note (let alone foreclose)..

    REMARKS: The basis of some interesting arguments here that will fall deaf in a limited jurisdiciton or bench trial. As one Judge I overheard say – “you’ll need to bring this argument to the appeallate court”.

    Chance of prevailing here are slim and none . Unless tied to the deed which is the security for the collateral . The encumbering security to grant interest in title is in “void” for the life of the loan (“untill it goes to sale.”)

    That is WHY THEY DO A 100% CREDIT BID!

    MSoliman
    expert.witness@live.com

  3. “Same old tactic. Denial, in your face intimidation and then when there is nowhere else to go, they fold.”

    Yup, sure is. Now they think they can pull this crap on Wiki too – let’s see how fast they fold when the $hit hits the fan. Goading Wiki is not a particularly bright idea.

    “Bank of America just fired the preemptive escalation shot in its duel with Wikileaks. Late on Friday, America’s biggest mortgage lender, and the firm that is now getting sued left and right for various mortgage transgressions, announced it is joining MasterCard, Paypal and Visa in ceasing transactions for Wikileaks. While this decision will certainly not improve Operation Anonymous’ empathy toward the North Carolina bank, it may just precipitate overt retaliation by Assange, who is now rumored to be in possession of data that could provie harmful to BAC. Which is why this sudden escalation out of left field by the bank strikes as surprisingly odd: BofA’s upside is very limited while its downside could be 100% – even if Wikileaks is bluffing, why provoke them.”

    http://www.zerohedge.com/article/after-bofa-escalates-refuses-process-wikileaks-payments-wiki-realiates-advises-americans-put

  4. THE A MAN, Dee, and anyone else who thinks I’m ‘racist’,

    Some of Judaism’s greatest quotes from its holiest of holy’s, the Talmud.
    http://www.fourwinds10.com/siterun_data/history/zionism/news.php?q=1291390324

    F.Y.I.
    “Goy”, “Goyim” and “Gentile” means any and every non-Jewish Human Being.

  5. Oh — one more thing — most originators are gone – at least in their original corporate set-up form.

    So — who are the putbacks going to —- THE DEPOSITOR — who was the SUBSIDIARY of the Wall Street Bank that purchased the loans from the originator.

    And, the Depositor sold ALL the CERTIFICATES to the TRUST to the SECURITY UNDERWRITER — who was ALSO a subsidiary of the Wall Street Bank that purchased the originated loans.

    The Putbacks (Repurchases) are to the BANK that purchased the loans from the originator. They can use all the subsidiaries that they want — and all the off-balance sheet conduits that they want — and all the accounting conversions from whole loans to securities that they want — IT DOES NOT NEGATE THE FACT THAT THE WALL STREET BANK PURCHASED THE LOANS FROM THE ORIGINATORS. In this case, the Wall Street purchasing bank was BofA.

    But, of course, they “bank” on borrowers being stupid — they know they cannot hide from “investors” in pass-through securities — who BY THE WAY — ARE NOT YOUR CREDITOR. The Bank is your creditor — until they dispose of collection rights —- ONLY THE BANK CAN TELL YOU THE PATH OF YOUR LOAN. Again, in this case, the Bank is —- BofA.

  6. Alina is absolutely correct.

    And, Rescission is a a Statute of Repose — not Statute of Limitations – which can be affected by discovery of facts.

    Joyce Louise — thinking the same thing as to repurchases. And, back to Ameriquest MDL — Circuit Court shut down rescission as a class action because rescission is individual. So — why is Ameriquest MDL mediating rescission claims??

  7. Yes, we just had announcement of BOA lawsuit by AZ AG. this is good but he does not sue on invididuals behalf..
    http://ow.ly/3r8UO

  8. Arizona and Nevada State Attorney Generals sueing BofA for mishandling loan mods

    http://online.wsj.com/article/SB10001424052748704034804576025691923732346.html?mod=WSJ_hp_LEFTWhatsNewsCollection

  9. To dny above,

    You asked Garfield to respond but I will also. Any borrower whose loan is eventually ‘bought back’ under duress can clearly speculate that the investor had enough evidence of some sort to prove it was unenforceable.

    IF I had a mortgage (which I don’t) I would:

    1. determine what is the current, accurate value
    of my home ( using a combination of tax
    assessor’s valuation, current appraisal, current
    Broker’s Price Opinion, local real estate agent
    opinion, Willow’s value assessment and any
    other tool for input I could find)
    2. Do an honest assessment of my ability to make
    a mortgage payment
    3. Prepare a modification package which
    requested the following:
    a. a reduction in principal balance to the
    current value of my home, (with a clearly
    stated proviso that I would never be charged
    with the amount written down, not for taxes
    or any other purpose
    b. a reasonable FIXED interest rate
    c. a loan term which worked based on the
    amount I could afford to pay each month

    IF, and only If, I could get my pretender lender to agree to this terms then I would agree to the signing of a NEW, modified mortgage which would need to be recorded in the local recorder’s office and NOT placed in the MERS system.

    An attorney would be your best advice to get the language exactly right in such an agreement and to be sure that the lender did not ‘appear’ to comply with your request but screw you once again.

    Many, if not most, homeowners are currently in a position to make the lender agree to new terms if you are able to make a reasonable payment on the property. This whole mess has created a unique window of opportunity but it requires that consumers understand the “Bank Game” and step up to the table prepared to play hard ball.

    Knowing your opponent’s weakness is an excellent starting place to being able to win not just the round, but the game. It is true that some folks will walk away with free houses but a more realistic expectation ( and a reasonable goal for everyone) is to use the fact that many mortgages are unsecured debt and take advantage of this great opportunity to get your totally unsecured debt reduced and restructured so that you can manage it, rather than just hope you can be one of the lucky ones.

    Seize the opportunity life has presented you to make this better for you long term. Take control of your housing situation.

    I am pleased I lived long enough to see ‘the chickens come home to roost.’

  10. Recently heard also of a “case” that was “confidentially” settled, the gag is on, so that the rest of America doesn’t get a chance! NOT FOR LONG THOUGH, and they know it.

  11. dny,

    SCTUS ruled in Beach v. Ocwen that there is an absolute 3 extended period of time for a borrower to exercise their right of rescission.

    “We respect Congress’s manifest intent by concluding that the Act permits no federal right to rescind, defensively or otherwise, after the 3-year period of §1635(f) has run.”

    The FRB’s 2004 comments to the TILA state that once a borrower exercises their right of rescission, the security interest is automatically voided. The revisions that the FRB is trying to pass takes that away and reverts TILA to rescission under contract law – meaning that in order for a borrower to rescind, they must tender first. So, in essence, the FRB is trying to take away the borrower’s leverage of rescission under TILA.

    Having said that, the courts in various jurisidictions have already eviscerated many of TILA’s protections. A TILA rescission no longer has the protections that Congress intended when it was originally passed.

  12. Alina, it’s my understanding that TILA rescission available for “material misstatement in loan documents” starts tolling when the “borrower” gets the true disclosures regarding mistatements made in loan docs. I could be wrong, and I don’t know what courts say about his, because I ain’t no lawyer, but methinks this is why the banks are recently and frantically trying to pursuade the Fed to change TILA rescission regulations before a new Consumer Protection Agency rules the TILA roost. In other words, I don’t think simply dragging things out for more than three years beyond “loan” “closing” date helps pretender lenders.

  13. Question to those of you more into the securities angle? Won’t this help those of us with lawsuits against BOA? Probably one of the reasons BOA did not want to settle with us was they were claiming our “notes” still had value–to do otherwise would be a problem in the lawsuits with the investors or aig or the government. If they now are willing to “buy back” these notes or pools, they can write off these “notes” because in fact now nobody needs to know what they are really worth–nothing! Does that make any sense to anyone else but me?

  14. Mr. Pulatie,

    The remedy for the homeowner is a difficult question to answer. By forcing buybacks, the loans go back to either the Seller or the Depositor (depends on the PSA). Usually, it is the Seller that must repurchase the loans.

    The loans at issue suffer from a myriad of prblems beginning with fraud in the origination of the loans. However, most of the loans are way past the extended 3 year statute of repose under the Truth in Lending Act, therefore, the borrowers have limited recourse. There is an argument for rescission under contract law (very different than under TILA), however, this would be difficult for most borrowers since they would have tender first.

    Quiet title actions are another course and most probably the best course of action. With the machinations of Wall Street, it would not be very difficult to prove a break in the chain of title. Add to this the fact that the Seller or the Depositor was forced to repuchase the loan for faulty transfer and it would be an easy win for the borrower.

    But quiet titles do not address the isue of the note. If a borrower is successful at a quiet title action, the note then is still considered due and owning but is now unsecured.

  15. I think you will have to wait until the early part of 2011 for BofA to really head for the drain and, maybe, CitiBank as well. The mega banks need to go. They have engineered the ruination of the planet. If you believe in less regulation for the banking industry, you do not know what you are talking about. http://www.challengingforeclosure.com Sirak@challengingforeclosure.com

  16. And also, “repurchase” somehow creates the ILLUSION that the “repurchasing” party (BOA?) would then actually have “clear title” to the “repurchased” “loans.” Of course, after such an act, would seem that the “repurchasing” party could NEVER have status as holder in due course and would be subject to all defenses by a suing “borrower.” Also, if a breach of reps and warranties leads to “repurchase,” wouldn’t the “borrower” have a right to know the “defects” that triggered the “repurchase” demand and assert same against a foreclosing party? If the fact that the loans weren’t transferred properly and THAT is the reason for the “repurchase” demand, how does this constitute a “repurchase?” – As in, “repurchase” WHAT, exactly? If the MBS were not MB and were simply BS, then wasn’t that FRAUD, plain and simple?

  17. DNY,

    Interesting observation. I shall have to give that some more thought. However, on first impression, I would suggest that it would depend upon whether it was in fact MBS or synthetic CDO’s.

    Michael Lewis’ book, The Big Short, explains the differences in more of a layman’s terms.

  18. Alina,

    I have read their articles. They all support the arguments. Other writers have written opposing articles. I only care what is working in the courts.

    What I am asking is why, if the arguments are so overwhelming, why are the Investor attorneys not using these arguments? None are.

    Reps and Warranties is difficult to argue. Each loan must be completely reviewed. Assignments means simply getting recording profiles on each property. That is cheaper and quicker.

    Why are the Investors not using the arguments? It is common knowledge now. What do they know that you don’t know.

    You read here about some NY and FL courts accepting part of the arguments. Yet, these are in reality only a handful of rulings. In most courts, the arguments don’t survive the demurrer or dismissal.

    You can claim that the judges are corrupt, but that is simply a ruse.

    Now, if the arguments are successful, what do you think that the remedy for the homeowners should be?

    That is the next question that needs to be addressed.

  19. Right, so if indeed the “Mortgage-Backed Securites” were NEVER “mortgage-backed” because the “loans” were never properly transferred, as Patrick points out below, why wouldn’t the suing “investors” simply argue that they were defrauded and go after the perps for money back plus damages? Is the prospect that the “investors” would have to argue that the bonds were backed by NOTHING simply too terrifying for them? As he points out, a “repurchase” would rely on clear title to the loans, something that the “investors” probably can never demonstrate.

  20. Mr. Pulatie,

    One more thing – proper assignment and/or transfer of the mortgage loans into the trust is part of the reps and warranties.

  21. Mr. Pulatie,

    You stated:
    “If Garfield’s arguments about the assignment to the Trust after closing means that the loan and note never lawfully entered the Trust, and that this is such a compelling argument, then why are the attorneys for the investors not using this argument? It would be much easier and less costly just to pull public records on each loan that examining in depth each loan. And it would be easier to prove.”

    First of all, this argument has not only been advanced by Mr. Garfield, it has also been advanced by Adam Levitin, Ira Bloom, and Thomas Adams, Yves Smith, Karl Denniger, to just name a few. Therefore it is not a specious argument but has merit.

    I suggest you read Adam Levitin’s Congressional testimony as well as the many articles he has written on creditslips.org. Additionally, Yves Smith posted the affidavits prepared by Ira Bloom and Thomas Adam in an Alabama case. I also suggest that you educate yourself on New York Trust law.

  22. A Man,

    You avoid the question. If the lack of assignment means that the loan never went into the Trust is such an overwhelming argument, why are the attorneys for the investors not using it?

    That would be an open and shut case, if it was true.

    What do they know about the subject that Garfield is not telling you?

  23. Why are the banks commiting alleged fraud robosigning back dating and not telling us who the investors are. broken chain of title (so they can sell the same loan multiple times). If they were doing things the correct way they wouldnt be in the mess they are in with the Attorney Generals and Judge Shack.

    Here in California the problem is that the Banks underwrite the bankrupt State.

  24. Everybody knows that a settlement is always cheaper than going to trial.

    Prosecutors unless politically motivated in almost all criminal civil IRS Fraud cases will offer a much lighter sentence if they dont have to go to trial (even if they have evidence) and the defendant gets a lighter sentence if he/she admits to something much lighter.

  25. I have one simple question regarding the B of A lawsuit.

    It is obvious that the investors have hired a knowledgeable and experienced law firm. They are using the Reps and Warranties in the PSA do try and force buybacks. This is an argument that requires extensive examination of each and every loan.

    If Garfield’s arguments about the assignment to the Trust after closing means that the loan and note never lawfully entered the Trust, and that this is such a compelling argument, then why are the attorneys for the investors not using this argument? It would be much easier and less costly just to pull public records on each loan that examining in depth each loan. And it would be easier to prove.

    Are the investor attorneys so ill informed that they do not understand Garfield’s arguments? Or that they have never heard the arguments, even after three years of his “preaching”?

    Or do the attorneys know something flawed about Garfield’s arguments that is not being presented to you?

    This may explain why only a very few courts have considered Garfield’s arguments, and accepted them as “valid”.

    Remember, almost all courts dismiss the allegations that Garfield proposes. That is why there are few rulings that support the loan transfers as being valid. Garfield’s arguments almost never pass the demurrer or dismissal phase to get an injunction or go to trial.

  26. Well, there you go. Been trying to get that message over for months. What happens to the borrower who is now having to deal with B O A if they repurchase your loan?. Well that depends on the bottom line and what if anything the government will do to assist them should they go for a massive program to do that. It does indeed become a dfferent ball game..

    Since they will now own your loan, they could modify it in a more satisfactory way that better suits the borrower’s needs. And it won’t take or shouldn’t take that long to determine if you can be approved for a modification because there is no second investor to check on. Or, they can stand with their already pathetic servicing and not come up with a program that will help because it may worsen their bottom line. They will have a lot more freedom to do whatever I believe. If I am wrong, Neil will know.

    I never thought repurchase was the answer now as it was in the 1980’s. All B of A had to do was subsidize the homeowner’s payment early on so the trickle down effect would not have happened and the recovery would have happened sooner and other lenders/servicers may have followed suit. NOw they are going to have to pay out the big bucks to buy them back and still are facing homeowners who are unable to make their payments. Now it is back in B of A’s Court and the situation is far worse.

    All they had to do was make the non conforming loan conforming back in 2007 and 2008 which would have resulted in no foreclosures or buy backs. I may be wrong, but the PSA had to be followed so a vote by the investors would have had to be taken to allow the subsidy. They would have come out whole so that would have been stupid to not approve it. The Depositor, the Trustee and the servicer were not properly handling the management of the bonds, PSA

    Funny thing, he seems like it would have been far easier to pay out 50 Billion contributed by 5 lenders to supplement the individual mortgage payments for 3 million people for 5 years rather than throw out 100’s of billions repurchasing the loans. IN this way, the loans would have remained current, no foreclosures, investors would have gotten their money, minimal job loss, and a chance to buy some time to work through the issues without destroying the housing market who equity losses for thousands of homeowners was devastating. I know the rule is that a borrower can not have a subsidy, but that was before the huge mess was brought into play. Investors that bought homes however would not have been part of the subsidy program, but at least property values would not have fallen through the roofs and the write downs never would have happened except in a minimal way and probably ended up off balance but still performing loan. II am not saying it is perffect, but people would still be in the homes, cities and towns would not be taking from taxpayers to maintain and purchase f/c owned by the lenders. There has been NO helpl whatsoever, but a continuing flow of taxpayer money to banks who are still as we speak in the same mess.

    If the AG’s can settle with the lenders on properties that were foreclosed on and should not have been that will take care of group one homeowners.. If the the banks repurchase the loans that will take care of group 2, that will take care of the investors and now it will be up to the lender after he repurchases the loans to take care of group 3, the borrower. We may just be getting somewhere. That is where a subsidy plan could work. A partnership plan with the homeowner giving him so many years to clear up his issue. At the end of the 5 years everyone still in the subsidy program, would have their payment set, automatically, at a rate determined by the market (or something related thereto, but certainly with a ceiling). That way potential investors buying up those loans from Say B of A will be able to schedule their own income and whether or not they want to buy the loans in the first place. Seasoning of those loans will have happened because they will have a 2 to 5 year record.

  27. What exactly does it mean for the “borrower” if the “loan” has been forcefully “repurchased?” Information relating to this event will no doubt be kept secret, claimed to be proprietary, etc. If documents were faked in the past, wouldn’t BOA, the “servicer,” merely claim “we own it now” because we “repurchased” the “loan.”

    Neil, thank you as always for your insight above, but could you guess as to what the other screwed party to the single transaction, the “borrower,” might then do in response to “repurchase” of the “loan?”

  28. […] this article: BofA Folding Under Investor Pressure   Tags: corruption, foreclosure Posted in: […]

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