Bank of America Home Loans President Barbara Desoer said in written testimony before the Senate Banking Committee that because the majority of its mortgages are held by investors, the bank is "constrained" in its role as a mortgage servicer for three-fourths of their mortgage portfolio. The committee will hear testimony Tuesday from BofA (BAC) and JPMorgan Chase (JPM) on recent foreclosure and documentation problems at the two banks and others. Each suspended foreclosures because employees signed affidavits without properly reviewing documentation, a problem, according to the Congressional Oversight Panel, that could threaten the entire financial system. Desoer said in testimony released by BofA ahead of the Tuesday afternoon hearing that 77% of its servicing portfolio is held by investors, with Fannie Mae and Freddie Mac holding 60% of these loans. "Many investors limit Bank of America’s discretion to take certain actions," Desoer said. "When working with delinquent customers, we aim to achieve an outcome that meets customer and investor interests, consistent with whatever contractual obligations we have to the investor." The Association of Mortgage Investors, however, said in a press statement that mortgage servicers should no longer place their conflicted interest ahead of homeowners. "We urge all the major bank servicers to invest the time and resources necessary to allow for borrowers to find sustainable solutions in a timely manner and customary fashion," said AMI Executive Director Chris Katopis. "No one should lose their home solely because of paperwork mishandling or lack of due process." When BofA acquired Countrywide in 2008, its servicing portfolio tripled to 14 million mortgages. That's roughly one of five all U.S. mortgages. The majority, Desoer said, or 86%, are current and making their mortgage payments, but the segment of distressed borrowers remains elevated. "Nearly 600,000 customers have not made a mortgage payment in more than a year; of these 195,000 have not made a mortgage payment in two years," Desoer said. After a review of its foreclosure procedures and more than 100,000 affidavits, Desoer said while the basis of foreclosure actions have proven accurate, it has identified areas for improvement. These include a new affidavit form and more quality control checks. "We have, however, reached a crossroads between loan modification efforts and the reality of foreclosure. Fortunately, early stage delinquencies are stabilizing," Desoer said. Write to Jon Prior. The author holds no relevant investments.