Last week, when we reported on a threat letter to Bank of America from a formidable group of bondholders assembled by Gibbs & Bruns and on Quinn Emanuel being hired to investigate Fannie Mae and Freddie Mac’s potential claims against issuers of residential mortgage-backed securities, we talked about hurricane warnings. It’s time to upgrade, folks. We may be looking at a Category 5 gale hitting big banks and Wall Street issuers before this is all over.

On Wednesday, bondholder counsel David Grais of Grais & Ellsworth and lawyer-turned-bondholder-wrangler Talcott Franklin of the Investor Clearing House held a conference for residential mortgage-backed securities investors. (Here’s a webcast, courtesy of Grais & Ellsworth.) Every one of the 100 seats in the room was taken, Grais told us, as was each of the 250 telephone lines into the live webcast. Bondholders who bought securities backed by badly underwritten or deficiently serviced mortgages are evidently mad as hell and trying to figure out how to minimize their losses.

But it’s not going to be easy, as Bethany McLean reported this week at Slate (and Financial Times blogger Tracy Alloway has been reporting for months). Bondholders must jump through a series of procedural hoops just to get to litigation–as two trusts suing Bank of America recently learned the hard way–and then must figure out what kind of suit makes the most sense.

To get a better grip on the paths this litigation is likely to travel, we spent a good bit of time on the phone with David Grais, whom we once called “The Splashiest Plaintiffs Lawyer in the Mortgage-Backed Securities Game.” Grais has been at this a while; he represents two of the five Federal Home Loan Bank Boards that have filed state-court securities cases against RMBS issuers, and he was on the losing end of the trusts’ case against Bank of America. His insights answered a lot of our questions.

First off, Grais warned that there’s a big leap between disgruntled bondholders and plaintiffs. Even bondholders who’ve petitioned trustees to investigate mortgage-backed securities or signed notices of deficiency are sometimes reluctant to sue banks and Wall Street firms, often because they’re fearful that the banks will them cut them off. “We’re in the early stages of devising a structure to permit investors to participate anonymously,” he said.

Next is the question of what type of suit to file. Grais favor state-law securities suits by individual bondholders, such as those he’s filed on behalf of Charles Schwab and the Federal Home Loan Banks of Seattle and San Francisco. State blue-sky laws don’t require a showing of fraudulent intent, Grais explained, and typically require issuers to make investors whole through issuer buy-backs. The problem with state securities claims, though, is that not every investor can bring them, depending on when and how their bonds were purchased. There are also statute of limitations issues.

That leaves two other types of suits, Grais said, both of which are based on alleged issuer failures. The first are buy-back or put-back claims, in which investors assert issuers didn’t meet contractual underwriting standards in assembling the mortgages that backed the securities they offered. (As Kathy Patrick of Gibbs & Bruns noted last week, by asserting breach of contract instead of securities fraud, bondholders avoid having to prove intent.)

Bondholders can also assert claims based on issuers’ alleged pooling and servicing failures after the securities were sold. Conduct that impairs the value of the bonds in violation of pooling and servicing contracts (such as robo-signing foreclosure documents) could support such a suit.

The key hurdle for both buy-back and servicing claims is that both require big coalitions of bondholders. To bring a suit, investors must have the support of 25 percent of the voting rights in the issuing trust.

Grais told us he doesn’t favor buy-back suits, not only because of the 25 percent hurdle, but because any recovery accrues to the trust, and not necessarily to the bondholders who filed the suit. (Their particular recovery depends on their standing in the trust.) He’s hesitant about pooling and servicing suits, he said, because servicing agreements between issuers and investors don’t typically specify damages for violations.

Grais said that he hopes to see some megacases–like the one the Gibbs & Bruns coalition appears to be contemplating (Grais said that group seems to be asserting both underwriting and pooling and servicing violations)–but that it’s likelier that the investor outreach he and Franklin of the Investor Clearing House are conducting “will spawn lots of smaller cases.”

Either way, we can’t wait to see what happens next.