Mortgage-bond investors are urging the government to stop banks from saddling them with the costs of probes into sales of the debt.

The Association of Mortgage Investors, whose members include DoubleLine Capital LP and AllianceBernstein Holding LP, made the plea to U.S. Attorney General Eric Holder in a letter last week. The missive followed reports that Bank of America Corp. (BAC) and Citigroup Inc. (C) were separately attempting to negotiate multibillion dollar accords with the U.S. that would grant credits to the lenders for changing loan terms for homeowners.

"The retirement security of the innocent parties whose money we manage could be harmed if these settlements follow recent precedents," the Association's Executive Director Chris Katopis wrote in the letter.

Bond-fund managers have criticized a series of bank settlements with authorities over mortgages since the financial crisis, saying terms calling for an easing of borrower burdens can lower the value of holdings in mutual funds, endowments and pensions they oversee. The AMI sent a similar letter to Holder last year before a $13 billion accord with JPMorgan Chase & Co. that included $4 billion of consumer relief that can apply to loans that have been bundled into securities and sold.

'Your Money'

"If BofA or anyone else wants to settle with the Justice Department, good," Vincent Fiorillo, global sales manager at DoubleLine, said in a telephone interview. "Use your money, not investors' money. It's not your money to use," he said. "Who are investors? First responders, teachers, people living on a fixed income. Joe Everyday is the investors. And, for some reason, the government keeps allowing it to happen."

Ellen Canale, a Justice Department spokeswoman, declined to immediately comment.

Justice Department officials have asked for more than $10 billion from Citigroup and $17 billion from Bank of America to settle mortgage-bond probes, a person with knowledge of the discussions, who asked not to be named because they're confidential, said this month. At one point during the talks, Bank of America was expected to provide at least $5 billion in relief to consumers as part of a proposed settlement, a person familiar with the talks said.

Mortgage investors' ire over such deals has built since a 2008 settlement between Bank of America's Countrywide Financial unit and state attorneys general described as totaling $8.4 billion in which claims of predatory lending yielded an accord that called for mostly investor-owned loans to be revised.

BlackRock, Pimco

BlackRock Inc., the world's largest money manager, publicly criticized last year's government agreement with JPMorgan, after Pacific Investment Management Co., which oversees the biggest bond fund, in 2012 faulted a $25 billion settlement with five banks over their foreclosure practices. Bank of America received 39 percent of consumer-relief credits under that accord for loans it didn't own, according to documents released in March.

Iowa Attorney General Tom Miller and Department of Housing and Urban Development Secretary Shaun Donovan dismissed investor complaints on a conference call with reporters in March. Loan terms can only be changed if the result is better for investors than a foreclosure, Donovan said.

"The investor position has never been right on this," Miller said. "They've never been the victims."

The Association of Mortgage Investors is seeking to be involved "in any negotiations from this point forward to make sure our economic interests are protected and not sacrificed by the parties the government has charged," according to its letter. "To do otherwise will damage the MBS markets further and limit the average Americans' housing affordability and availability opportunities for generations to come."

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