Recent news reports that bond investors — including the Federal Reserve Bank of New York and PIMCO — may sue Bank of America because Countrywide Financial Corp. did a bad job of servicing loans that went into ABS/MBS have been a bit misleading. Attorneys working for these investors are not looking at the residential servicing practices on whole loans per se, but the "master servicing" on the end product — the MBS. According to a letter sent out by Gibbs & Bruns LP (the law firm hired by investors), Countrywide, as master servicer, failed to go after the original funder of the loan as a way to cure deficiencies on defaulted mortgages. (Read between the lines: CFC was not demanding buybacks of these loan sellers. And do you know why? Oftentimes, CFC was the original funder.) The MBS investor complaint list goes on and on. B of A inherited this mess because it was unlucky enough to pay $4 billion for CFC back in mid-2008. Well, at least the Charlotte bank isn't on the hook for Angelo Mozilo's legal settlement with the Securities and Exchange Commission
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