The seller of any "ineligible or predatory" mortgages also should pay the cost of modifying them for homeowners -- or buy those loans back from the pools of collateral backing the securities, she added.
"Ours is a large, determined and cohesive group of bondholders," Patrick said. "We have a clearly defined strategy. We plan to vigorously pursue this initiative."
For Bank of America, this is the latest source of pressure on the banking giant to repurchase the loans that back up mortgage securities.
Key points
- If Bank of America is forced to buy back troubled loans from mortgage securities, it will have to pay 100 cents on the dollar. That could leave it with billions of dollars in losses.
- The New York Fed ended up owning Countrywide mortgage securities through its bailout of insurer American International Group.
- When AIG faced a cash crunch in 2008, the New York Fed set up a special-purpose vehicle known as Maiden Lane II that bought residential mortgage-backed securities from AIG.
- The New York Fed lent $19.5 billion to Maiden Lane II for the purchases in November 2008. At the end of June, this loan stood at $14.7 billion.
- Other investors in the group including BlackRock Inc., MetLife Inc. and Pimco, the world's largest bond fund manager owned by Germany's Allianz, according to Bloomberg News. Spokesmen at those three companies declined to comment.
- Bank of America Chief Financial Officer Chuck Noski recently gave a detailed presentation on the company's potential exposure to loan repurchases during a conference call with analysts.
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This is just the beginning. It's just one bank, so far, and it's just the suckered holders of these junk securities -- primarily investment house PIMCO, hedge fund Blackrock and, get this, the Federal Reserve Bank of New York. These supposedly sophisticated investors are trying to get their money out before the proverbial sh*t hits the fan, because they know that eventually, all these mortgages (which BofA has been calling "assets," and which still get listed on their books at their face value) are in truth essentially worthless.
BofA is just the tip of the iceberg. All the "too-big-to-fail" banks and most regional banks are in the same situation. They still have plenty of junk on their books and don't want it known. Nor do they want to be forced to buy back the junk they managed to sell to others, even after its junk status had become known within the company. They're desperately hoping that the housing bubble will re-inflate and that all this junk will thereby lose its junk status and be happily transformed into the real assets they once were.
Yet most American homeowners haven't yet gotten the word about any of this. Why? Because our corporate media is keeping it pretty well covered up, partly out of concern for all the advertising that banks pay for in said media. As a result, American homeowners don't yet realize that most of them don't any longer have to pay even one dime to these wretched and conniving banksters that brought us this damned economic crisis.
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