Mortgage investors put pressure on Bank of America over mortgage-backed securities they say Countrywide, a unit of the bank, misrepresented.
USA-COMPANYUS - Investors are concerned Bank of America will be forced to buy back $47 billion worth of mortgage-backed securities. The New York Fed has been asking since this summer for BofA to buy back mortgage bonds. Now a report says a consortium including Pimco and BlackRock has joined the action. The report by Bloomberg says the group cites BofA's Countrywide unit for not servicing the loans properly. The New York Fed and Pimco declined to comment on that report.
This comes as Bank of America becomes the third big U.S. bank to top Wall Street earnings estimates. The nation's largest bank by assets has been generating profits by cutting reserves for bad loans, but some analysts question how long it can continue posting profits without growing its core business.
Like many banks, BofA is closely tied to what happens with foreclosures, mortgages and the economy in general.
Standard & Poor's Howard Silverblatt:
HOWARD SILVERBLATT, SENIOR INDEX ANALYST, STANDARD & POOR'S SAYING:
"If the housing market significantly improves then the loan losses are okay. But if the housing market declines or actually stays flat then these loan reserves are going to have to go up and they're going to eat into profit. So that is a concern at this point in time."
Bank of America posted third-quarter results just one day after announcing it would partially lift a halt to nationwide foreclosures. There's been a public outcry that lenders cut corners in the foreclosure process.
Meantime, The White House says federal regulators will meet Wednesday to discuss the foreclosure process for all banks.
Carmen Roberts, Reuters