Countrywide’s Mortgage Mess Could Cripple Bank of America, Experts Say

November 24, 2010

(ChattahBox U.S. News)—Bank of America’s 2008 acquisition of doomed mortgage provider Countrywide could also spell doom for BofA, as the mammoth bank may have to recapture millions of loans that it previously believed had been transferred to trusts. In addition, Bank of America could be forced to buy back scores of mortgage-backed securities if they are found to not be “mortgage-backed,” which “could on its own destroy Bof A’s balance sheet,” AOL Daily Finance reports.

The outcome may hinge on a N.J. foreclosure case decided last week, in which one home loan executive testified that Countrywide customarily maintained possession “of the original note and related documents.” Countrywide was known to have securitized 96% of its loans, but if the company did not transfer the loans to trusts that issued mortgage-backed securities, BofA could find millions of loans back on the company’s books that it previously believed had been transferred to trusts, AOL Daily Finance notes.

In addition, if the securities aren’t found to be “mortgage-backed,” investors could force BofA to buy them back, which could cause significant harm to BofA’s balance sheets. Plus, if the titles to the homes in question were not properly created, the banks will find it harder to foreclose on the homeowners, and selling the properties will become difficult, AOL reports.


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