Bank of America 2011 Annual Report Download - page 203

Bank of America 2011 201
approval process, which can include appeals and could take a
substantial period of time. In particular, conduct of discovery and
the resolution of the objections to the settlement and any appeals
could take a substantial period of time and these factors could
materially delay the timing of final court approval. Accordingly, it
is not possible to predict when the court approval process will be
completed.
If final court approval is not obtained by December 31, 2015,
the Corporation and legacy Countrywide may withdraw from the
BNY Mellon Settlement, if the Trustee consents. The BNY Mellon
Settlement also provides that if Covered Trusts representing
unpaid principal balance exceeding a specified amount are
excluded from the final BNY Mellon Settlement, based on investor
objections or otherwise, the Corporation and legacy Countrywide
have the option to withdraw from the BNY Mellon Settlement
pursuant to the terms of the BNY Mellon Settlement agreement.
There can be no assurance that final court approval of the
settlement will be obtained, that all conditions to the BNY Mellon
Settlement will be satisfied or, if certain conditions to the BNY
Mellon Settlement permitting withdrawal are met, that the
Corporation and legacy Countrywide will not determine to withdraw
from the settlement. If final court approval is not obtained or if
the Corporation and legacy Countrywide determine to withdraw
from the BNY Mellon Settlement in accordance with its terms, the
Corporation’s future representations and warranties losses could
be substantially different than existing accruals and the estimated
range of possible loss over existing accruals described under
Whole Loan Sales and Private-label Securitizations Experience on
page 206.
Settlement with Assured Guaranty
On April 14, 2011, the Corporation, including its legacy
Countrywide affiliates, entered into an agreement with Assured
Guaranty, to resolve all of the monoline insurer’s outstanding and
potential repurchase claims related to alleged representations and
warranties breaches involving 29 first- and second-lien RMBS
trusts where Assured Guaranty provided financial guarantee
insurance (the Assured Guaranty Settlement). The agreement also
resolves historical loan servicing issues and other potential
liabilities with respect to these trusts. The agreement covers 21
first-lien RMBS trusts and eight second-lien RMBS trusts, which
had an original principal balance of approximately $35.8 billion
and total unpaid principal balance of approximately $20.2 billion
as of April 14, 2011. The agreement included cash payments
totaling approximately $1.1 billion to Assured Guaranty, as well as
a loss-sharing reinsurance arrangement that had an expected
value of approximately $470 million at the time of the settlement,
and other terms, including termination of certain derivative
contracts. During 2011, the Corporation made cash payments of
$1.0 billion with the remaining $57 million payable on March 31,
2012. The total cost recognized for the Assured Guaranty
Settlement as of December 31, 2011 was approximately $1.6
billion. As a result of this agreement, the Corporation recorded
$2.2 billion in consumer loans and the related trust debt on its
Consolidated Balance Sheet at December 31, 2011, due to the
establishment of reinsurance contracts at the time of the Assured
Guaranty Settlement.
Government-sponsored Enterprise Agreements
On December 31, 2010, the Corporation reached agreements with
the GSEs, under which the Corporation paid $2.8 billion to resolve
repurchase claims involving first-lien residential mortgage loans
sold directly to the GSEs by entities related to legacy Countrywide
(the GSE Agreements). The agreement with FHLMC extinguished
all outstanding and potential mortgage repurchase and make-
whole claims arising out of any alleged breaches of selling
representations and warranties related to loans sold directly by
legacy Countrywide to FHLMC through 2008, subject to certain
exceptions. The agreement with FNMA substantially resolved the
existing pipeline of repurchase claims outstanding as of
September 20, 2010 arising out of alleged breaches of selling
representations and warranties related to loans sold directly by
legacy Countrywide to FNMA. The GSE Agreements did not cover
outstanding and potential mortgage repurchase claims arising out
of any alleged breaches of selling representations and warranties
related to legacy Bank of America first-lien residential mortgage
loans sold directly to the GSEs or other loans sold directly to the
GSEs other than described above, loan servicing obligations, other
contractual obligations or loans contained in private-label
securitizations.
Outstanding Claims
The Outstanding Claims by Counterparty and Product table
presents outstanding representations and warranties claims by
counterparty and product type at December 31, 2011 and 2010.
For additional information, see Whole Loan Sales and Private-label
Securitizations Experience on page 206 of this Note and Note 14
– Commitments and Contingencies. These repurchase claims
include $1.7 billion in demands from investors in the Covered
Trusts received in 2010, but otherwise do not include any
repurchase claims related to the Covered Trusts. During 2011, the
Corporation received $17.5 billion in new repurchase claims,
including $14.3 billion in new repurchase claims submitted by the
GSEs for both legacy Countrywide originations not covered by the
GSE Agreements and legacy Bank of America originations, and
$3.2 billion in repurchase claims related to non-GSE transactions.
During 2011, $14.1 billion in claims were resolved primarily with
the GSEs and through the Assured Guaranty Settlement. Of the
claims resolved, $7.5 billion were resolved through rescissions
and $6.6 billion were resolved through mortgage repurchase and
make-whole payments. Claims outstanding from the monolines
declined as a result of the Assured Guaranty Settlement, and new
claims from other monolines declined significantly during 2011,
which the Corporation believes was due in part to the monolines
focusing recent efforts towards litigation. Outstanding claims from
whole loan, private-label securitization and other investors
increased during 2011 primarily as a result of the increase in
repurchase claims received from trustees in non-GSE
transactions.