Agoracom Blog

BREAKING …. Battle Of The Foreclosure Titans Begins

Posted by AGORACOM at 3:06 PM on Tuesday, October 19th, 2010

Via Bloomberg

Pimco, NY Fed Said to Seek Bank of America Repurchase of Mortgages

Pacific Investment Management Co., 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.

A bondholder group wrote to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service the loans properly, their lawyer said yesterday in a statement that didn’t name the firms.

Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s. Last month, BNY Mellon declined to investigate mortgage files in response to a demand from the bondholder group, which has since expanded. Countrywide’s servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases by bypassing the trustee, said Kathy Patrick, their lawyer at Gibbs & Bruns LLP.

“We now are in a position where we have to start a clock ticking,” Patrick, who is based in Houston, said today in a telephone interview.

MetLife Inc., the biggest U.S. life insurer, is part of the group represented by Gibbs & Bruns, said the people, who declined to be identified because the discussions aren’t public. TCW Group Inc., the manager of $110 billion in assets, expects to join BlackRock, the world’s largest money manager, and Pimco, which runs the biggest bond fund, in the group, the people said.

Read The Full Story At Bloomberg

First, let’s be clear that the source for the story are “people familiar with the matter.”  As such, it remains to be confirmed by any of the parties involved – but we are going to bet that Bloomberg has the story right.

Second, if and when this story gets confirmed, I’ve been pounding the table on this for the past week and continue to assert this is a problem waaaayyy beyond the US Federal Government.  In fact, I repeat my statement that “The Federal Government Has No Wand To Waive” because this problem involves State pension funds, foreign governments, local homeowners and now industry monsters such as Pimco and BlackRock, let alone the New York Federal Reserve.

This is going to be the bloodbath for the banks and their friends in Washington will not be able to save the day.

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