Bank of America's Mortgage Misfortune: Today's Outrage

NEW YORK (TheStreet) -- Bank of America (BAC Quote) is being stalked by mortgage investors who want the Countrywide mortgage division to buy back modified home loans.

The bank sought help from a federal judge, figuring that since the U.S. Congress passed new laws to encourage loan modifications, then the rules of the game had changed for everyone -- including mortgage investors who now face lower interest and principal payments than they were originally expecting.

It's quite a conundrum for BofA. The laws Congress passed to address the mortgage meltdown pretty much require the bank to modify loans to help borrowers stay in their homes. So it's not entirely the bank's fault that the loan terms are being changed.

And mortgage investors knew the risks when they bought the loans. Just look at the name of one of the investment groups that brought the lawsuit against Countrywide: Greenwich Financial Services Distressed Mortgage Fund. Yeah, they knew the mortgages were distressed.

But I don't blame the mortgage investors for trying to force Bank of America to absorb all the losses, nor do I blame Bank of America for trying to avoid bearing all the pain.

Congress left a lot of questions unanswered and the federal judge asked to hear the case -- Richard Holwell -- decided he wasn't qualified to provide any answers.

So now it will be up to myriad state courts to figure out. I don't know why Holwell thinks state courts are better qualified to decide. Clearly, he just didn't want this to be on his shoulders.