By ABIGAIL FIELD Posted 1:30 PM 11/22/10 Company News, Columns, Investing, Bank of America, Real Estate, Credit, Stocks in the News
Testimony in a New Jersey foreclosure case decided last week may spell big trouble for Bank of America (BoA).
If what one bank employee said on the stand is accurate, paperwork problems BoA acquired when it purchased the failing mortgage provider Countrywide in 2008 could leave BoA on the hook for billions of dollars.
Linda DiMartini, a supervisor and operational team leader for the Litigation Management Department of BoA 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 BoA 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 securities.
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 BoA to buy the securities back.
A significant number of buybacks could on its own destroy BoA's balance sheet. Nor could BoA 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.
This is a complicated article. Essentially a clouded title means there can be no foreclosure. Read the entire article at http://www.dailyfinance.com/story/credit/bank-of-america-mortgage-document-errors-trouble-countrywide/19728402/
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If what one bank employee said on the stand is accurate, paperwork problems BoA acquired when it purchased the failing mortgage provider Countrywide in 2008 could leave BoA on the hook for billions of dollars.
Linda DiMartini, a supervisor and operational team leader for the Litigation Management Department of BoA 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 BoA 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 securities.
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 BoA to buy the securities back.
A significant number of buybacks could on its own destroy BoA's balance sheet. Nor could BoA 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.
This is a complicated article. Essentially a clouded title means there can be no foreclosure. Read the entire article at http://www.dailyfinance.com/story/credit/bank-of-america-mortgage-document-errors-trouble-countrywide/19728402/
Rightardia feed: feeds.feedburner.com/blogspot/IGiu
Netcraft rank: 8515
http://toolbar.netcraft.com/site_report?url=http://rightardia.blogspot.com
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