Major Mortgage Investors Not Happy with the Banks

Reuters is reporting numerous major mortgage investors are banding together to seek both answers from the major banks and possibly even legal pressure to buy back a huge sum of bad loans.

This all comes as the continued fall-out from sloppy foreclosure paperwork banks have been using to foreclose on properties.

New York-based securities attorney David Grais and Dallas-based Talcott Franklin met yesterday with more than 50 large mortgage bond investors in an effort to get them to join the collective fight against banks. Some of the heavyweights reportedly at the meeting in New York included Prudential, Paulson & Co, MetLife and the Federal Reserve Bank of New York.

They want to force these lenders to buy back mortgages which did not meet the original terms demanded by the investors when they originally purchased the mortgage-backed securities.  It should be noted that both Freddie Mac and Fannie Mae have already wons billions (yes, with a B) of dollar back from banks based on similar demands as related to bonds they guarantee.

Among the numerous concerns of these investors is that these mortgage servicers will foist the costs related to fixing these problems back to them, the bondholders. Now would banks ever do an underhanded thing like that? (Yes, sarcasm intended here!)

Another law firm is inching ever closer to suing Bank of America on behalf of Pacific Investment Management Co and several others. In this potential lawsuit, the investors are alleging that not only did Bank of America fail to properly service their mortgages, but sold them loans that never should have been sold in the first place.

It may be difficult for John Q. Public to sue these huge banks, but the investors—especially those that are banding together in these collective lawsuits—have the pockets to get it done.