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New York Fed joins investors in call for BoA buy back

by Adam Russett on October 20, 2010

Earlier in the week, a group of investors demanded that Bank of America buy back billions of dollars worth of mortgage securities that are saddled with incorrect documentation and lending standards. The Washington Post reports that sources close to the situation are saying that the New York Federal Reserve has joined in the demand, accusing the banking giant of cutting corners when issuing mortgages.

The call to buy back the mortgages sets up an interesting stand off. If Bank of America refuses to comply it could lead to a lawsuit. Additionally, the move by the New York Fed is an interesting one because it runs counter to the actions of the Treasury Department, which has been supporting the embattled bank through the economic crisis of the last several years. Despite the outcry from investors and the federal government, Bank of America chief executive Brian Moynihan seems unworried.

“We don’t see the issues that people [are] worried about, quite frankly,” he said in a conference call on Tuesday.

While the largest accusation is that the bank incorreclty forclosed on properities, it is certainly not the only one. Investors also claim that are also claiming that Countrywide Financial, which was bought by Bank of America in 2008, has failed to service an estimated $47 billion worth of mortgage loans.

The bank also recently announced a $7.3 billion third-quarter loss that it claims was the result of a $10.4 billion write-down in response to new federal limits on credit card fees. In the meantime, courts are working to discern the legal issues involved in the way judges review forclosures, which could have far reaching implications on the practices of Bank of America and other financial giants.

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