Life may get a whole lot tougher for thousands of seriously distressed homeowners. They could be evicted thanks to a deal cut between Bank of America, the country’s largest mortgage servicer, and investors in the bank's troubled mortgage securities, The New York Times reports.

Bank of America recently agreed to pay $8.5 billion to institutional investors who lost money in sour mortgage investments they had with the bank.

(Getty Images photo)

Struggling homeowners in somewhat decent shape may be able to negotiate their loan terms and keep their houses as part of the deal, bank officials say.

"The goal is to reinstate as many borrowers in a modification that performs well," says Tony Meola, a servicing executive with Bank of America, the newspaper reports.

But for those who look like they cannot work out their problems, they may be evicted.

"It also is likely to lead to faster resolution in those unfortunate situations where foreclosure is inevitable. While not a desirable outcome, the recovery of the housing markets depends on moving through the foreclosure process as quickly and fairly as possible," Meola adds.

Some bondholders want to challenge Bank of America's settlement with the investors in mortgage-backed securities gone bad, saying it may be unfair to other bond investors.

In court papers filed Tuesday in New York State Supreme Court in Manhattan, 11 companies sharing the name Walnut Place said they had "serious concerns about the secret, non-adversarial, and conflicted way in which the proposed settlement was negotiated and about the fairness of the terms," Reuters reports.