Problems with mortgage documents Bank of American acquired when it purchased the mortgage provider Countrywide Financial in 2008 could cost the bank billions, if a testimony in a New Jersey foreclosure case proves accurate.
During the foreclosure trial, an operational team leader for Bank of America, Linda DiMartini, said it was "customary for Countrywide to maintain possession of the original note and related documents."
If her testimony is proven, Countrywide may have not properly transferred the necessary mortgage documents when it sold loans to other banks who then used the loans to create residential mortgage backed securities (RMBS).
If mortgage-backed securities aren't in fact "mortgage-backed," investors who bought these securities from Countrywide could hold Bank of America accountable.
It is the oversubscribing these RMBS documents which may ultimately destroy the banks.