A group of Bank of America (BAC) bondholders, including Pacific Investment Management Co. (PIMCO) and the Federal Reserve Bank of New York, are seeking to force the largest U.S. bank by assets to buy back as much as $47 billion in mortgage-related bonds. The bonds were packaged from mortgages initiated by Bank of America unit Countrywide Financial Corp, Bloomberg News reported.
PIMCO and the New York Fed led a group of bondholders in a letter to Bank of America and Bank of New York Mellon (BK), the trustee on the debt, which charged that Countrywide didn't properly service the debt. Bank of America acquired Countrywide in 2008.
The bondholders are claiming that the loans were faulty when they were packaged into billions of dollars worth of bonds, which fell in value as home-prices experienced the largest drop in more than 70 years, according to Bloomberg.
Bank of America didn't immediately respond to a request for comment. CEO Brian Moynihan said the company will "defend [its] shareholders" by disputing repurchase demands it deems unjustified, according to Bloomberg.
Earlier Tuesday, Bank of America said its fiscal third-quarter loss widened to $7.3 billion on a $10.4 billion charge related to credit and debit card reform legislation passed over the summer. Excluding the charge, the company beat analyst estimates because of lower credit costs and higher net interest income.