BofA’s Moynihan ‘Surprised’ by New York Fed Loan Putback Demand

Bank of America CEO Brian T. Moynihan
Brian T. Moynihan, chief executive officer of Bank of America Corp. Photographer: Brendan Hoffman/Bloomberg

Bank of America Corp. Chief Executive Officer Brian T. Moynihan said he was surprised when the Federal Reserve Bank of New York and investors sent a letter pushing the firm to repurchase soured mortgages pooled into securities.

The bank expects to resolve the dispute, which could pressure Bank of America to foreclose on borrowers more quickly, Moynihan, 51, said today in Boston during a presentation to banking analysts. “I don’t think we should be put in a position where we aren’t trying to help homeowners through this strife because people want us to foreclose faster,” he said.

Bank of America shares declined 4.4 percent on Oct. 19 after news of the letter signed by Pacific Investment Management Co., BlackRock Inc. and others, alleging the bank’s Countrywide Financial Inc. subsidiary didn’t service loans properly. The New York Fed acquired mortgage debt through its 2008 rescues of Bear Stearns Cos. and American International Group Inc.

“The fact that they signed the letter from your standpoint surprised you, it surprised me, and it is a surprise to a lot of people,” Moynihan said, referring to the bondholders. “We have disputes with them about other assets in those pools and we’ve resolved them. So life will go on.”

Bank of America, the largest U.S. lender, has said it has formal outstanding demands from mortgage investors seeking repurchases of almost $13 billion of loans that may have failed to accurately document key data such as income and home values. The Charlotte, North Carolina-based bank is also among lenders being investigated by state attorneys general over its handling of foreclosures.

Selling BlackRock

Moynihan said he called BlackRock Inc. CEO Larry Fink to discuss the dispute. “We’ll work through it,” Moynihan said.

Bank of America yesterday said it would reduce its 34 percent stake in BlackRock, preferring to use the capital for its own businesses. The bank will remain a strategic partner of BlackRock, the world’s largest asset manager, for a long time, Moynihan said.

The bank said last month it would start resubmitting foreclosure affidavits in 102,000 cases in which judgment is pending. Amid pressure from lawmakers and state officials, bankers have delayed action in order to review filings that some borrowers claim were marred by so-called robo-signing, in which employees vouched for the accuracy of court statements without personally checking loan records.

The company acquired Countrywide Financial Corp. in 2008 and is the largest servicer of U.S. home loans and second- biggest originator of loans after Wells Fargo & Co. Bank of America is handling about 1.3 million loans in which payments are at least 60 days late, using a customer-service staff of 20,000 employees that has tripled over the past two years, according to the company.

‘Got to Get It Done’

The mortgage-bond investor group including BlackRock thinks Bank of America’s foreclosures take too long because of missing documents, processing mistakes and insufficient staffing to evaluate borrowers for loan modifications, Kathy Patrick, their lawyer at Gibbs & Bruns LLP, said in an Oct. 19 telephone interview.

“None of the bondholders are opposed to modifications for deserving borrowers, but you’ve got to get it done” in a timely fashion, she said.

Moynihan responded today to a question on whether Bank of America would consider a bankruptcy of Countrywide to limit potential losses from distressed home loans.

“We don’t see any liability that would make us think differently about working through this in the ways we are working through this,” he said. The question came from Mike Mayo, a CLSA Ltd. analyst who wrote a report dated Nov. 2 titled, “Is a Countrywide bankruptcy possible.”

Bank of America gained 37 cents, or 3.2 percent, to $11.89 at 1:10 p.m. in New York Stock Exchange trading. The shares have declined 24 percent this year through yesterday.

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