Bank of America 2011 Annual Report Download - page 228

226 Bank of America 2011
their complaint to add similar allegations with respect to an
additional securitization trust. On May 17, 2011, the Corporation
and Sellers jointly moved to dismiss the amended complaint.
On August 2, 2011, plaintiffs filed a separate action entitled
Walnut Place LLC, et al. v. Countrywide Home Loans, Inc. et al., in
New York Supreme Court, New York County, against the Corporation
and Sellers, and The Bank of New York Mellon in its capacity as
trustee. This action makes allegations similar to those in the prior
Walnut Place LLC, et al. v. Countrywide Home Loans, Inc. et al. lawsuit
with respect to an additional securitization trust. On October 7,
2011, the Corporation and Sellers jointly moved to dismiss the
complaint.
TMST, Inc. Litigation
On April 29, 2011, the Chapter 11 bankruptcy trustee for TMST,
Inc. (formerly known as Thornburg Mortgage, Inc.) and for certain
affiliated entities (collectively, Thornburg), along with Zuni
Investors, LLC (ZI), filed an adversary proceeding in the U.S.
Bankruptcy Court for the District of Maryland entitled In Re TMST,
Inc., f/k/a Thornburg Mortgage, Inc. against CHL and the
Corporation. Plaintiffs filed an amended complaint on July 29,
2011, in which they allege, among other things, that CHL sold
residential mortgage loans to Thornburg pursuant to two
agreements, and that CHL allegedly breached certain
representations and warranties contained in those agreements
concerning property appraisals, prudent and customary loan
origination practices, accuracy of mortgage loan schedules, and
occupancy status. The complaint further alleges that those loans
were deposited by Thornburg into a securitization trust, that ZI
purchased certificates issued by that trust, and that the
securitization trustee subsequently assigned to ZI and the
bankruptcy trustee the right to pursue representation and warranty
claims. Plaintiffs seek a court order requiring CHL to repurchase
the mortgage loans at issue, or alternatively, unspecified damages
for alleged breach of contract. CHL and the Corporation have filed
motions to dismiss the case, to withdraw the reference to the
Bankruptcy Court, and for transfer of venue to the United States
District Court for the Central District of California.
U.S. Bank Litigation
On August 29, 2011, U.S. Bank, National Association (U.S. Bank),
as trustee for the HarborView Mortgage Loan Trust 2005-10 (the
Trust), a mortgage pool backed by loans originated by CHL, filed a
complaint in New York Supreme Court, New York County, in a case
entitled U.S. Bank National Association, as Trustee for HarborView
Mortgage Loan Trust, Series 2005-10 v. Countrywide Home Loans,
Inc. (dba Bank of America Home Loans), Bank of America
Corporation, Countrywide Financial Corporation, Bank of America,
N.A., and NB Holdings Corporation. U.S. Bank seeks a declaration
that, as a result of alleged misrepresentations by CHL in
connection with its sale of the loans, defendants must repurchase
the loans. U.S. Bank further asserts that defendants are liable for
breach of contract for the alleged failure to repurchase a subset
of those loans. Defendants removed the case to the U.S. District
Court for the Southern District of New York. U.S. Bank filed a motion
to remand which is currently pending. On February 7, 2012, the
JPML issued an order transferring the case to the Countrywide
RMBS MDL in the U.S. District Court for the Central District of
California.
Mortgage Servicing Investigations and Litigation
The Corporation entered into a consent order with the Office of
the Comptroller of the Currency (OCC) on April 13, 2011, which
requires servicers to make several enhancements to their
servicing operations, including implementation of a single point of
contact model for borrowers throughout the loss mitigation and
foreclosure processes, adoption of measures designed to ensure
that foreclosure activity is halted once a borrower has been
approved for a modification unless the borrower fails to make
payments under the modified loan and implementation of
enhanced controls over third-party vendors that provide default
servicing support services. In addition, the consent order required
that servicers retain an independent consultant, approved by the
OCC, to conduct a review of all foreclosure actions pending, or
foreclosure sales that occurred between January 1, 2009 and
December 31, 2010 and submit a plan to the OCC to remediate
all financial injury to borrowers caused by any deficiencies
identified through the review. The review is comprised of two parts:
a sample file review conducted by the independent consultant,
which began in October 2011, and file reviews by the independent
consultant based upon requests for review from customers with
in-scope foreclosures. The Corporation began outreach to those
customers in November 2011 and additional outreach efforts are
underway. Because the review process is available to a large
number of potentially eligible borrowers and involves an
examination of many details and documents, each review could
take several months to complete. The Corporation cannot yet
accurately determine how many borrowers will request a review,
how many borrowers will meet the eligibility requirements or how
much in compensation might ultimately be paid to eligible borrower.
On February 9, 2012, the Corporation reached agreements in
principle (collectively, the Servicing Resolution Agreements) with
(i) the DOJ, various federal regulatory agencies and 49 attorneys
general to resolve federal and state investigations into certain
origination, servicing and foreclosure practices (the Global AIP),
(ii) the Federal Housing Administration (the FHA) to resolve certain
claims relating to the origination of FHA-insured mortgage loans,
primarily by Countrywide prior to and for a period following the
acquisition of that lender (the FHA AIP) and (iii) each of the Federal
Reserve and the OCC regarding civil monetary penalties related
to conduct that was the subject of consent orders entered into
with the banking regulators in April 2011 (the Consent Order AIPs).
The Servicing Resolution Agreements are subject to ongoing
discussions among the parties and completion and execution of
definitive documentation, as well as required regulatory and court
approvals. The Global AIP is subject to, among other things, Federal
court approval in the United States District Court in the District of
Columbia and regulatory approvals of the United States
Department of the Treasury and other federal agencies. The
Consent Order AIPs are subject to, among other things, the
finalization of the Global AIP.
The Global AIP calls for the establishment of certain uniform
servicing standards, upfront cash payments of approximately $1.9
billion to the state and federal governments and for borrower
restitution, approximately $7.6 billion in borrower assistance in
the form of, among other things, principal reduction, short sales
and deeds-in-lieu of foreclosure, and approximately $1.0 billion of
refinancing assistance. The Corporation could be required to make
additional payments if it fails to meet its borrower assistance and