At issue are mortgage putbacks...
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Bank of America Corp., after vowing to fight requests that it repurchase certain loans, has begun potential settlement discussions with some of its largest mortgage investors.
The 17-member group now in talks with the nation's largest bank as measured by assets includes the Federal Reserve Bank of New York, government-owned mortgage company Freddie Mac, BlackRock Inc., and Allianz SE's Pacific Investment Management Co., or Pimco.
The bank's approach with this group appears to signal a change in tone for Chief Executive Brian Moynihan, who in November pledged to engage in "day-to-day, hand-to-hand combat" on investor requests to repurchase flawed mortgages made before the U.S. housing collapse.
The investors, some of whom are acting on behalf of clients, sent a letter in October alleging that a Bank of America unit didn't properly service 115 bond deals comprised of residential mortgages. It gave the bank 60 days to respond.
The disclosure of the letter sent Bank of America's stock tumbling 4.4% on Oct. 19, as investors grappled with concerns that the bank could be overwhelmed with such investor requests. The group has since expanded and now includes 17 investors and 167 bond deals.
"Our clients are obviously very pleased that we've been able to open this dialogue and we hope to move it forward in a constructive direction," said Kathy Patrick, an attorney for the bondholders. Ms. Patrick said that the initial extension in the time period for negotiations will be through Jan. 30, "but it can obviously be extended if the discussions are productive."
No U.S. bank is more vulnerable to an array of political and financial threats posed by home-lending woes. Bank of America has more repurchase requests than any of its rivals. It services one of every five U.S. mortgages, many of them from Bank of America's acquisition of lender Countrywide Financial Corp. in 2008.
Total new mortgage repurchase claims amounted to $12.8 billion at the end of the third quarter, up from $7.5 billion in the year-ago quarter. The bank has set aside $4.4 billion in reserves for these put back attempts.
Continue reading at the WSJ...
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