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Tuesday, October 19, 2010

Mortgage Backed Security Holders Stir……A Little…

Institutional investors who purchased mortgage backed securities issued by Countrywide, now Bank of America have sent a demand letter requesting that Bank of America repurchase their mortgages for non-performance.

What makes this a big deal is just who is writing this.

Pacific Investment Management Co. [PIMCO], 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 group of bondholders wrote a letter to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service loans properly, their lawyer said yesterday in a statement that didn’t name the firms. The New York Fed acquired mortgage debt through its 2008 rescues of Bear Stearns Cos. and American International Group Inc.
Bank of America responded that it would, "defend its shareholders," which might make for an interesting conflict between two groups of too big to fail financial institutions.

In either case, it makes Congressional Deus Ex Machina hail Mary play less likely, since the constituencies that normally bribe lobby the House and Senate appear to be fairly evenly divided.

My guess is that this is actually not as big a deal as it sounds.

I agree with Yves Smith, that this is primarily posturing:
  • This is not litigation, it's just a nastygram that was release.
  • The claim appears to be an extension of a claim against trusts.
  • They are claiming that the lack of due diligence was because the former Countrywide is not going after Countrywide, that sold the loan.
  • That BoA/Contrywide has been too slow in forclosing. (!?!)
Still, if it prevents Congress from bailing out the banksters, it would be a good thing.

The full press release from the bond holders is below the fold:

Institutional Holders of Countrywide-Issued RMBS Issue Notice of Non-Performance Identifying Alleged Failures by Master Servicer to Perform Covenants and Agreements in More Than $47 Billion of Countrywide-Issued RMBS

Oct. 18 /PRNewswire/ --Today, the holders of over 25% of the Voting Rights in more than $47 billion of Countrywide-issued RMBS sent a Notice of Non-Performance (Notice) to Countrywide Home Loan Servicing, as Master Servicer ("Countrywide Servicing"), and to Bank of New York, as Trustee, identifying specific covenants in 115 Pooling and Servicing Agreements (PSAs) that the Holders allege Countrywide Servicing has failed to perform.

The Holders' Notice alleges that each of these failures has materially affected the rights of the Certificateholders under the relevant PSAs. Under Section 7.01 of the PSAs, if any of the cited failures "continues unremedied for a period of 60 days after the date on which written notice of such failure has been given ... to the Master Servicer and the Trustee by the Holders of Certificates evidencing not less than 25% of the Voting Rights evidenced by the Certificates," that failure constitutes an Event of Default under the PSAs.

In a previous release, the Holders emphasized their intent to invoke all contractual remedies available to them to recover their losses and to protect their rights. Kathy Patrick of Gibbs & Bruns LLP, lead counsel for the Holders, emphasized that the Holders' notice does not seek to halt loan modifications for troubled borrowers. Instead, it urges the Trustee to enforce Countrywide Servicing's obligations to service loans prudently by maintaining accurate loan records, demanding the repurchase of loans that were originated in violation of underwriting guidelines, and compelling the sellers of ineligible or predatory mortgages to bear the costs of modifying them for homeowners or repurchasing them from the Trusts' collateral pools.

Patrick also noted that the group of Holders that tendered today's Notice of Non-Performance is larger, and encompasses more Countrywide-issued RMBS deals, than were included in the August 20 instruction letter. When asked why the group of holders was larger, Patrick replied, "Ours is a large, determined, and cohesive group of bondholders. We have a clearly defined strategy. We plan to vigorously pursue this initiative to enforce Holders' rights."

The Notice of Non-Performance, which is the first step in the process of declaring an Event of Default, was issued on behalf of Holders in the following Countrywide-issued RMBS:

Deal Name Deal NameDeal Name
CWALT 2004-32CB
CWHL 2004-22
CWL 2006-15
CWALT 2004-6CB
CWHL 2004-25
CWL 2006-16
CWALT 2004-J1
CWHL 2004-29
CWL 2006-19
CWALT 2005-14
CWHL 2004-HYB9
CWL 2006-2
CWALT 2005-21CB
CWHL 2005-11
CWL 2006-20
CWALT 2005-24
CWHL 2005-14
CWL 2006-22
CWALT 2005-32T1
CWHL 2005-18
CWL 2006-24
CWALT 2005-35CB
CWHL 2005-19
CWL 2006-25
CWALT 2005-36
CWHL 2005-2
CWL 2006-26
CWALT 2005-44
CWHL 2005-3
CWL 2006-3
CWALT 2005-45
CWHL 2005-30
CWL 2006-5
CWALT 2005-56
CWHL 2005-9
CWL 2006-7
CWALT 2005-57
CB CWHL 2005-HYB3
CWL 2006-9
CWALT 2005-64
CB CWHL 2005-HYB9
CWL 2006-BC2
CWALT 2005-72
CWHL 2005-R3
CWL 2006-BC3
CWALT 2005-73CB
CWHL 2006-9
CWL 2006-BC4
CWALT 2005-74T1
CWHL 2006-HYB2
CWL 2006-BC5
CWALT 2005-81
CWHL 2006-HYB5
CWL 2006-SD1
CWALT 2005-AR1
CWHL 2006-J2
CWL 2006-SD3
CWALT 2005-J5
CWHL 2006-OA5
CWL 2006-SD4
CWALT 2005-J9
CWHL 2006-R2
CWL 2006-SPS2
CWALT 2006-14CB
CWHL 2007-12
CWL 2007-2
CWALT 2006-20CB
CWHL 2007-16
CWL 2007-5
CWALT 2006-37R
CWHL 2008-3R
CWL 2007-6
CWALT 2006-41CB
CWL 2005-10
CWL 2007-7
CWALT 2006-HY12
CWL 2005-11
CWL 2007-9
CWALT 2006-OA11
CWL 2005-13
CWL 2007-BC1
CWALT 2006-OA16
CWL 2005-16
CWL 2007-BC2
CWALT 2006-OA17
CWL 2005-2
CWL 2007-BC3
CWALT 2006-OA6
CWL 2005-4
CWL 2007-QH1
CWALT 2006-OA9
CWL 2005-5
CWL 2007-S3
CWALT 2006-OC10
CWL 2005-6


CWALT 2006-OC2
CWL 2005-7


CWALT 2006-OC4
CWL 2005-8


CWALT 2006-OC5
CWL 2005-9


CWALT 2006-OC6
CWL 2005-AB2


CWALT 2006-OC7
CWL 2005-AB3


CWALT 2007-17CB
CWL 2005-AB4


CWALT 2007-23CB
CWL 2005-BC5


CWALT 2007-24
CWL 2005-IM1


CWALT 2007-OA7
CWL 2006-10


CWALT 2008-2R
CWL 2006-12







SOURCE Gibbs & Bruns, LLP

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