Bank of America 2010 Annual Report Download - page 209

connection with the offering or sale of certain additional mortgage-backed
securities by BAS, MLPFS, CSC, several of their affiliates and more than 40
other defendants. CPIM alleges that it is the assignee of the claims of certain
entities that allegedly purchased mortgage-backed securities issued or sold
by BAS, MLPFS and CSC in various offerings. In addition to MBS Claims, CPIM
contends that BAS, MLPFS, CSC and their affiliates made false and mislead-
ing statements in violation of the Massachusetts Uniform Securities Act in
connection with these offerings regarding: (i) due diligence performed by the
underwriters on the mortgage loans and the mortgage originators’ underwrit-
ing practices; (ii) the credit enhancements applicable to certain tranches of
the MBS; and (iii) the validity of each issuing trust’s title to the mortgage loans
comprising the pool for that securitization.
Federal Home Loan Bank Litigation
The Federal Home Loan Bank of Atlanta (FHLB Atlanta) filed a complaint on
January 18, 2011 against the Corporation, CFC, CSC and Countrywide Home
Loans (CHL) in the State Court of Georgia, Fulton County, entitled Federal
Home Loan Bank of Atlanta v. Countrywide Financial Corporation, et al.In
addition to certain MBS Claims, FHLB Atlanta contends that defendants made
false and misleading statements regarding: (i) the credit ratings of the secu-
rities; and (ii) the transfer and assignment of the loans to the trusts.
The Federal Home Loan Bank of Chicago (FHLB Chicago) filed a complaint
against the Corporation, BAS, MLPFS and CSC in the Illinois Circuit Court,
Cook County, entitled Federal Home Loan Bank of Chicago v. Banc of America
Funding Corp., et al. (the Illinois Action). FHLB Chicago also filed a complaint
against BAS, CFC and subsidiaries of CFC in the Superior Court of California,
Los Angeles County, entitled Federal Home Loan Bank of Chicago v. Banc of
America Securities LLC, et al. (the California Action). In addition to certain
MBS Claims, FHLB Chicago contends that defendants made false and mis-
leading statements regarding among other things, the guidelines for extend-
ing mortgages to borrowers and the due diligence performed on repurchased
and pooled loans. Both actions have been removed to federal court.
The Federal Home Loan Bank of Pittsburgh (FHLB Pittsburgh) commenced
an action against CFC, CSC and certain other Countrywide affiliates, as well
as several ratings agencies, in the Court of Common Pleas of Allegheny
County Pennsylvania, entitled Federal Home Loan Bank of Pittsburgh v. Coun-
trywide Securities Corporation et al. FHLB Pittsburgh claims to have pur-
chased MBS issued by subsidiaries of CFC in five offerings for approximately
$366 million. In addition to certain MBS Claims, FHLB Pittsburgh contends
that defendants made false and misleading statements regarding the risk
associated with the MBS based on their credit ratings. Countrywide’s motion
to dismiss was denied on November 29, 2010.
The Federal Home Loan Bank of Seattle (FHLB Seattle) filed four separate
complaints, each against different defendants, including the Corporation and
several of its subsidiaries, Countrywide and Merrill Lynch, as well as certain
other defendants, in the Superior Court of Washington for King County
concerning four separate issuances entitled Federal Home Loan Bank of
Seattle v. UBS Securities LLC, et al.;Federal Home Loan Bank of Seattle v.
Countrywide Securities Corp., et al.;Federal Home Loan Bank of Seattle v.
Banc of America Securities LLC, et al. and Federal Home Loan Bank of
Seattle v. Merrill Lynch, Pierce, Fenner & Smith, Inc., et al.Inadditionto
certain MBS Claims, FHLB Seattle contends that defendants made false and
misleading statements regarding the number of borrowers who actually lived
in the houses that secured the mortgage loans and the business practices of
the lending institutions that made the mortgage loans. FHLB Seattle claims
that the sales violated the Securities Act of Washington. On October 18,
2010, the Corporation entities and Countrywide entities named as defen-
dants in three of the cases filed a consolidated motion to dismiss the
amended complaints, which is currently pending. On the same date, the
Merrill Lynch entities named as defendants in the fourth case filed a motion to
dismiss the amended complaint, which is currently pending.
The Federal Home Loan Bank of San Francisco (FHLB San Francisco) filed
two actions against various affiliates of the Corporation, as well as various
Countrywide and Merrill Lynch entities in the Superior Court of California,
County of San Francisco, entitled: (i) Federal Home Loan Bank of San Fran-
cisco v. Credit Suisse Securities (USA) LLC, et al., which asserts claims
against CFC, CSC, BAS and several of their affiliates; and (ii) Federal Home
Loan Bank of San Francisco v. Deutsche Bank Securities Inc., et al.,which
asserts claims against CSC and MLPFS. In addition to certain MBS Claims,
FHLB San Francisco contends that defendants made false and misleading
statements regarding the original mortgage lenders’ guidelines for extending
the loans to borrowers. FHLB San Francisco also claims that defendants failed
to disclose that third-party ratings services’ credit ratings of the MBS did not
take into account defendants’ false and misleading statements about the
mortgage loans underlying the MBS. On November 5, 2010, FHLB San Fran-
cisco sought permission from the court to amend its complaint in the first
action to include the Corporation as a defendant and, among other things, to
assert control person liability claims against the Corporation under state and
federal securities laws and to assert that the Corporation succeeded to CFC’s
interests. Defendants had removed the state court actions to federal court,
but on December 20, 2010, the U.S. District Court, Northern District of
California remanded the cases to state court and denied a motion to amend
the complaint as moot when it granted remand. On November 5, 2010, FHLB
San Francisco also filed a declaratory action in the Superior Court of Califor-
nia, County of San Francisco, entitled Federal Home Loan Bank of San Fran-
cisco v. Bank of America Corporation and Does 1-10, seeking a determination
that the Corporation is a successor to the liabilities of CFC including the
liabilities at issue in Federal Home Loan Bank of San Francisco v. Credit
Suisse Securities (USA) LLC, et al.
Charles Schwab Litigation
The Charles Schwab Corporation (Schwab) has filed an action against the
Corporation, BAS, Countrywide, and several of their affiliates, in the Superior
Court of California, County of San Francisco, on July 15, 2010 entitled The
Charles Schwab Corp. v. BNP Paribas Securities Corp., et al. This action is in
connection with the purchase by Schwab of approximately $577 million of
MBS, $166 million of which relates to claims with respect to the Corporation
and BAS and $411 million of which relates to claims with respect to Coun-
trywide. In addition to MBS Claims, Schwab contends that the Corporation,
BAS and Countrywide are liable for false and misleading statements regarding
among other things, the business practices of the lending institution that
made the original loan and MBS credit ratings. In September 2010, the
Corporation, BAS and Countrywide joined in or consented to the removal of
this action to the U.S. District Court for the Northern District of California.
Schwab has filed a motion to remand the action to California state court,
which remains pending.
Allstate Litigation
Allstate Insurance Company, Allstate Life Insurance Company, Allstate Life
Insurance Company of New York and American Heritage Life Insurance Com-
pany (collectively, the Allstate Plaintiffs) filed an action on December 27, 2010
against CFC, the Corporation, several of their affiliates and several individuals
in the U.S. District Court for the Southern District of New York, entitled Allstate
Insurance Company, et al., v. Countrywide Financial Corporation, et al.(the
Allstate Action). The Allstate Plaintiffs allege that they purchased MBS issued
by CFC related entities in 25 offerings between March 2005 and June 2007.
All but three of the 25 offerings in the Allstate Action are also at issue in the
Luther and Western Teamsters Actions. Two of the 25 offerings in the Allstate
Action are also at issue in the second amended complaint filed by plaintiffs in
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