BofA Resists Buying Back Bad Loans --- Bank Posts $7.3 Billion Third-Quarter Loss as Fee Revenue Tumbles; Effects of Regulatory Overhaul
Bank of America Corp. and some of its largest mortgage investors clashed on Tuesday as the bank vowed to fight government-backed demands that it repurchase loans that allegedly didn't meet underwriting guidelines and other promises.</br></br>The bank acknowledged receiving a Monday letter from investors alleging that a Bank of America unit didn't properly service 115 bond deals. The investors include Freddie Mac, the government-owned mortgage company. Freddie Mac and Fannie Mae, its larger sibling, have boosted demands on lenders over the past year to buy back defaulted loans that had been sold to and guaranteed by the mortgage titans.</br></br>But Tuesday's action marks the first step by either company to force banks to buy back mortgage-backed securities that were issued by Wall Street, not by government-backed mortgage giants.</br></br>Other investors, some of whom were acting on behalf of their clients, include the Federal Reserve Bank of New York, Neuberger Berman Group LLC, BlackRock Inc., Western Asset Management Co. and Allianz SE's Pacific Investment Management Co., or Pimco, according to people familiar with the matter.</br></br>The Charlotte, N.C., bank hoped the lifting of its foreclosure sale moratorium would debunk fears that the mortgage process was flawed. But investors grappled with new concerns Tuesday that the bank could be overwhelmed with investor requests to repurchase flawed mortgages made before the U.S. housing collapse. Its shares dropped 54 cents or 4.4% to $11.80. The shares have declined more than 30% since the end of April amid worries about regulatory reform, lackluster revenues and weak loan demand.