The prospect of a second legal assault is more recent. Shortly before the earnings call, Bank of America (nyse: BAC) received a letter from a lawyer representing eight powerful institutional investors, including BlackRock, Pimco and — most amazing of all — the New York Federal Reserve. The letter was a not-so-veiled threat to sue the bank unless it agrees to buy back billions of dollars worth of loans that are in securitized mortgage bonds the investors own.
Mainly, they are saying that Bank of America was servicing loans in these bonds that the bank knew violated the underwriting standards that the investors had been led to believe the bank was conforming to. What’s more, they said, the bank had never come clean about all the bad loans, as it was required to do. Therefore, say the investors, the bank has a contractual obligation to buy back the bad loans.'
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