The news that big banks will embark on ambitious programs to modify mortgage terms has been hailed as good news for the economy. But there's a downside, if you're an investor in the mortgage backed-securities, that include the modified loan. These MBS would be expected to decline. Which would reduce their value. Unsurprisingly, a group of MBS holders have sued Countrywide and its new parent, Bank of America, seeking to force them to buy back the loans they modify. A deal announced in October with 15 state attorneys general calls for Countrywide to settle charges of predatory lending for about 400,000 mortgages, reports Reuters. Other banks will modify mortgages but the majority of these loans appear to be loans that the bank holds.

For more:
- here's a Reuters article

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Mortgage backed securities news from FierceFinance