NEW YORK — Bank of America said it will not buy back bad mortgages from a series of high-profile investors who complained defaults are being handled improperly and homes not being foreclosed upon fast enough.
In response to an effort to push the Charlotte-based bank to buy back defaulted mortgages made by its Countrywide unit, Bank of America attorneys rejected claims that the loans were made improperly or being handled incorrectly in a letter Thursday.
The complaining investors include the Federal Reserve Bank of New York, Freddie Mac, Pimco Investment Management and Blackrock Financial Management.
The Fed is involved because it took over assets held by American International Group Inc., which faltered under the weight of bad home loans.
In the letter, first revealed by The New York Times, Bank of America attorneys also dismissed the suggestion that its handling of loan modifications and other efforts to prevent foreclosure violated the terms of the mortgage-backed securities the investors hold.
The Times reported that the mortgages pooled in the securities total about $47 billion. It is unclear what portion of those loans is in default.
The practice of modifying loans found to have faulty paperwork or those written outside of normal underwriting standards, according to a notice filed last month by investor attorney Kathy Patrick, breached agreements that the bank had signed on to.
By continuing to service bad loans rather than speeding up foreclosures, Patrick argued, Countrywide ran up servicing fees, enriching itself at the expense of investors.
Bank of America, however, described the loan modifications as the “proper response to an unprecedented housing crisis and in furtherance of the stated policy of the federal government.”
It called claims of poorly handled loans baseless.
The bank noted that at least one of the investors, Freddie Mac, has said more than once that it is “committed to helping troubled homeowners keep their homes,” and called its demand to speed up foreclosures inconsistent with that aim.
Patrick declined to comment on Bank of America’s response.
Investor worries about demands for buybacks of now-troubled mortgages, also known as “put-backs” on Wall Street, have weighed on shares of Bank of America and other companies in the past few months.
Shares of Bank of America gained 24 cents, or 2 percent, to $12.37 Friday.