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Moynihan's 2-Cents-on-Dollar Mortgage Offer Faces Hurdle

(Updates with investors after the filing of subheadline "behind his back.")

June 30 (Reuters) - Bank of America Corp. effort to go beyond the soured mortgages that Countrywide Financial Corp. packaged in securities may depend on whether a judge agrees that buyers of the world largest bond entered into an agreement generous enough for all investors.

The lender, the largest U.S. bank by assets, is seeking to pay $ 8.5 billion, or 2 percent, to avoid buying bad loans placed in 424 billion worth of bonds, an offer backed by a group of 22 carriers including BlackRock Inc. and Pacific Investment Management Co. in a deal announced yesterday.

"Two cents on the dollar is an absolute joke," said Bill Frey, head of investment and brokerage firm Greenwich Financial Services LLC of Greenwich, Conn., which advises investors in mortgage securities.Frey has lost a suit in Countrywide last year in which he said the agreements between the company and state attorneys general to modify bond loans unfairly penalized.

The agreement is the largest yet by Bank of America CEO Brian T. Moynihan to resolve disputes with companies that said they were duped by false claims such as property values ​​exaggerated or inflated borrowers' incomes. " The Charlotte, North Carolina-based bank fell 17 cents, or 1.5 percent, to $ 10.97 at 2:17 p.m. New York Stock Exchange after jumping 3 percent yesterday.

'Not Out of the Woods "

Bank of New York Mellon Corp., trustee of the debt is to get the approval of a New York judge to the case, which would apply to bond beyond the 22 companies in the talks. BNY Mellon said in a court document that the agreement is "reasonable", given the moral defenses Moynihan could rise if the trustee has sought 11 billion that its analysis showed could be justified.

The bank "is not off the hook," said Chris Gamaitoni, a search for Compass Point Trading LLC analyst in a note to investors. The $ 8.5 billion is a "starting point and are likely to increase significantly after the court hears the arguments of other parties invested "to as high as $ 26.5 billion.

Bank of America Chief Financial Officer Bruce Thompson, asked in a conference call yesterday if bond investors could further derail the agreement, the consensus among quoted companies with BNY Mellon, BlackRock and Pimco.