NEW YORK ( TheStreet) -- Some high-profile mortgage-bond investors reportedly want their money back from Bank of America (BAC - Get Report) as pressure intensifies on large mortgage servicers to take back loans that are going bad.
On Monday, a group of institutional investors represented by Gibbs & Bruns LLP said they had sent Bank of America a letter asking that it repurchase $47 billion worth of MBS. On Tuesday afternoon, a Bloomberg report indicated that the Federal Reserve Bank of New York, Pacific Investment Management Co. (Pimco), BlackRock (BLK), TCW Group and MetLife (MET) may be among those seeking buyback relief.
The news came after Bank of America detailed its buyback exposure of nearly $13 billion in a conference call that morning. It also helped send stocks down sharply in afternoon trading, with the Dow Jones Industrial Average plunging more than 200 points and BofA shares down 2.8% at $12.The Bloomberg report said Pimco, the New York Fed and BlackRock sent a letter to Bank of America this week seeking to "force" the bank to buy back bad loans. The debt in question had been packaged into a $47 billion mortgage-bond securitization by Countrywide Financial before it was acquired by BofA. During Bank of America's conference call, CFO Chuck Noski referred to a "letter" management had recently received from eight investors. "In our capacity as the servicer on 115 private label security transactions, we received a letter from eight investors purportedly owning interest in those transactions," said Noski. "The letter asserts breaches of certain servicing obligations including an alleged failure to provide notice of breaches of reps and warranties. While we continue to review and assess the letter and have a number of questions about its content -- including whether these investors actually have standing to bring these claims -- we continue to believe the servicer is in compliance with its servicing obligations." Noski said the deals had an original balance of $104 billion, which now stands at $46 billion due to prepayments and defaults.
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