Heads-Up: Countrywide's Mortgage Document Errors May Doom Bank of America - DailyFinance

[WillyT]

Countrywide's Mortgage Document Errors May Doom Bank of America
By ABIGAIL FIELD - Daily Finance
Posted 1:30 PM 11/22/10

<snip>

Testimony in a New Jersey foreclosure case decided last week may spell big trouble for Bank of America (BAC). If what one bank employee said on the stand proves to be accurate, paperwork problems it acquired when it purchased the failing mortgage provider Countrywide in 2008 could leave BofA on the hook for billions of dollars.

As first reported by Kate Berry for American Banker, Linda DiMartini, a supervisor and operational team leader for the Litigation Management Department of BAC Home Loans Servicing, testified in the foreclosure case of John T. Kemp that it was "customary for Countrywide to maintain possession of the original note and related documents."

If that's true, then Bank of America may discover that it has millions of loans on its books that it thought it had transferred to trusts that issued mortgage backed securities, because 96% of Countrywide loans were ostensibly securitized. As the Congressional Oversight Panel explained, that outcome alone could cause massive damage to a bank's balance sheet. And as bad as that would be, it isn't the only problem that could result from Countrywide hanging on to the notes.

If the mortgage-backed securities aren't in fact "mortgage-backed," investors who bought them could be able to force BofA to buy the securities back. A significant number of buybacks could on its own destroy BofA's balance sheet. Nor could BofA stave off either outcome retroactively by delivering those notes today. First, the contracts that created the trusts would typically forbid transferring the loans into the trusts now. Second, even if somehow that could happen, such a transfer would destroy the special tax status the mortgage backed securities enjoy and give the investors a different reason to put back the securities or sue over them.

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More: http://www.dailyfinance.com/story/credit/bank-of-america-mortgage-document-errors-trouble-countrywide/19728402/

:wow:

:kick:

[Fumesucker]

1. Meh, the taxpayers will just have to bail them out... Again..

Too big to fail don't ya' know, wouldn't be prudent.

[tridim]

7. That will not happen.

The Republicans may try, but this problem is too big to bail out. It's impossible.

And it's not just BoA either, JPM Chase did the same thing with WaMu.

[Fumesucker]

8. Wait and see...

One way or another BOA will dodge out of responsibility.

This crisis will get bipartisan attention, it won't be just up to the Republicans, the FIRE sector owns most of the Democrats too.

The only thing missing will be OMC to tell us "Thank God It Passed" and I'm sure some other troll will take his place.

[arcane1]

2. "special tax status the mortgage backed securities enjoy"

Why Oh Why? "Specials Tax Status" should apply to things that, you know, actually produce something!!

[Fumesucker]

5. Things that actually produce something do indeed have a special tax status..

They're taxed more heavily than those things that are just shuffling paper around.

[hobbit709]

3. All I got to say to BoA is

:nopity: :nopity: :nopity: :nopity:

[WillyT]

6. Yeah... I'm With You...

:shrug:

:hi:

[MadHound]

4. Oh don't worry, we'll bail them out

We've plenty of money to bail out banks and corporations. But helping out real people, meh, not so much.