William Frey, a private investor mortgage-backed securities, filed a lawsuit in NY State Supreme Court on
12/1/2008 alleging that modifiying some 400,000 home loans originally underwritten by the lender
Countrywide Financial is illegal.
The lawsuit, a class-action status was filed against Bank of America who bought Countrywide in late 2007.
Frey claims that loan modifications will short bondholders $8.4 billion by reducing borrower payments. These
loan adjustments may help struggling homeowners, but they may also run the risk of permanently damaging
the secondary market for housing financing.
This is how it works. Once a loan is originated, it is sold off to investors. These securities become Mortgage Backed Securities. Mortgage Backed Securities are purchased by trusts put together by Wall Street Bankers. Payments go the trusts when borrowers pay their mortgage, not the lender.
A Bank of America spokeswoman Shirley Norton says "We have not yet received a filing and, therefore, we
we cannot comment on specific claims. We are, however, a disappointed in this attempt to halt a program
intended to keep as many as 400,000 at-risk families in their homes and, together with similar programs
across the industry, stabilize the nation's housing market.
Frey's suggests that the Government to buy all the troubled loans from the mortgage-backed securities.
He estimates that the cost could run the Government $500 billion.
http://www.charlotterealestateforeclosures.com/00488F
