A group of bondholders stuck with $47 billion in Countrywide-issued residential mortgage-backed securities have positioned themselves to sue Bank of America. The bondholders claim that BofA failed to perform its duties as the servicer of the bond deals and want BofA to buy back some of the bonds. Kathy Patrick, of Gibbs & Bruns, who is representing the group, says that if BofA does not agree to buy back some of these securities they plan to sue.

Last week the New York state supreme court dismissed a class action lawsuit that claimed Bank of America was obliged to buy back hundreds of thousands of the same kind of securities. The case was dismissed on the grounds that the plaintiff did not have the support of 25 percent of certificate holders as required to commence litigation. However, in this case Patrick represents a group that comprises more that 25 percent of the voting rights, so they have met the required conditions to commence litigation.

If the case leads to a lawsuit it could be one of the first cases where mortgage-bond investors are seeking to enforce their contract rights. Patrick says their key advantage is that it is not a securities case, it is just contract enforcement. Thus, Patrick must only show that BofA did not fulfill the terms of the contract, they do not need to show intent. 

To learn more about Wall Street reform and current laws, watch our top-rated course by Daniel Shlufman "Key Mortgage & Real Estate Related Provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act"

For the full article, click here