Turn On The Lights, Watch The Roaches Scatter, Part 27

Yesterday Bank of America said "Foreclosuregate problem?  What problem?" and decided to proceed apace with foreclosures in 23 states.  We now see why they were so eager to get this behind them, because the Big Hedge Funds just delivered a dead fish wrapped in securitized mortgage cole slaw to BoA's front door and wants their action plus the vig.  Or else.

Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said.

A bondholder group wrote to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service the loans properly, their lawyer said yesterday in a statement that didn’t name the firms.

Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s. Last month, BNY Mellon declined to investigate mortgage files in response to a demand from the bondholder group, which has since expanded. Countrywide’s servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases by bypassing the trustee, said Kathy Patrick, their lawyer at Gibbs & Bruns LLP.

“We now are in a position where we have to start a clock ticking,” Patrick, who is based in Houston, said today in a telephone interview. 

Blackrock, Pimco, and the NY Fed are not going to eat $47 billion in cole slaw, folks...and that's the low end.  And you don't want to be the banks when this alarm clock goes off.  Keep in mind BoA is just one megabank, with some of the loans.  There's hundreds of billions more out there in cole slaw to pay up on, and you can bet that BoA isn't the only bank getting pieces of deceased Pisces in the mail.

Tim Geithner's phone is ringing off the hook right about now.  The game is now fully on, with the trillion dollar hedge funds on one side and the trillion dollar banks on the other.  One of them is going to get their money.  The other one will want TARPinator 2:  Judgment Day.  Guess who the losers will be?

Hang on, kids.  We just blew through a whole bunch of "BRIDGE OUT" signs and orange road barrels.