Bank of America 2011 Annual Report Download - page 53

Bank of America 2011 51
of the GSEs (the GSE Agreements). We have vigorously contested
any request for repurchase when we conclude that a valid basis
for repurchase does not exist and will continue to do so in the
future. However, in an effort to resolve these legacy mortgage-
related issues, we have reached bulk settlements, or agreements
for bulk settlements, including settlement amounts which have
been material, with the above-referenced counterparties in lieu of
a loan-by-loan review process. We may reach other settlements in
the future if opportunities arise on terms we believe to be
advantageous. For a summary of the larger bulk settlement actions
we have taken beginning in 2010 and the related impact on the
representations and warranties provision and liability, see Note 9
– Representations and Warranties Obligations and Corporate
Guarantees to the Consolidated Financial Statements. As
indicated in Note 9 – Representations and Warranties Obligations
and Corporate Guarantees and Note 14 – Commitments and
Contingencies to the Consolidated Financial Statements, these
bulk settlements generally do not cover all transactions with the
relevant counterparties or all potential claims that may arise,
including in some instances securities law, fraud and servicing
claims, and our liability in connection with the transactions and
claims not covered by these settlements could be material.
Recent Developments Related to the BNY Mellon
Settlement
Under an order entered by the court in connection with the BNY
Mellon Settlement, potentially interested persons had the
opportunity to give notice of intent to object to the settlement
(including on the basis that more information was needed) until
August 30, 2011. Approximately 44 groups or entities appeared
prior to the deadline; two of those groups or entities have
subsequently withdrawn from the proceeding and one motion to
intervene was denied. Certain of these groups or entities filed
notices of intent to object, made motions to intervene, or both
filed notices of intent to object and made motions to intervene.
The parties filing motions to intervene include the Attorneys
General of the states of New York and Delaware, whose motions
to intervene were granted. Parties who filed notices stating that
they wished to obtain more information about the settlement
include the FDIC and the Federal Housing Finance Agency. We are
not a party to the proceeding.
Certain of the motions to intervene and/or notices of intent to
object allege various purported bases for opposition to the
settlement, including challenges to the nature of the court
proceeding and the lack of an opt-out mechanism, alleged conflicts
of interest on the part of the institutional investor group and/or
the Trustee, the inadequacy of the settlement amount and the
method of allocating the settlement amount among the Covered
Trusts, while other motions do not make substantive objections
but state that they need more information about the settlement.
An investor opposed to the settlement removed the proceeding to
federal court. On October 19, 2011, the federal court denied BNY
Mellon’s motion to remand the proceeding to state court. BNY
Mellon, as well as the investors that have intervened in support
of the BNY Mellon Settlement, petitioned to appeal the denial of
this motion. On November 4, 2011, the district court entered a
written order setting a discovery schedule, and discovery is
ongoing. On December 27, 2011, the U.S. Court of Appeals for
the Second Circuit accepted the appeal, and stated in an amended
scheduling order that, pursuant to statute, it would rule on the
appeal by February 27, 2012.
It is not currently possible to predict how many of the parties
who have appeared in the court proceeding will ultimately object
to the BNY Mellon Settlement, whether the objections will prevent
receipt of final court approval or the ultimate outcome of the court
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,
we 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,
we 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 BNY
Mellon 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 we and
legacy Countrywide will not determine to withdraw from the
settlement. If final court approval is not obtained or if we and
legacy Countrywide determine to withdraw from the BNY Mellon
Settlement in accordance with its terms, our future
representations and warranties losses could be substantially
different than existing accruals and the estimated range of
possible loss over existing accruals described under Off-Balance
Sheet Arrangements and Contractual Obligations – Experience with
Investors Other than Government-sponsored Enterprises on page
55. For more information about the risks associated with the BNY
Mellon Settlement, see Item 1A. Risk Factors of this Annual Report
on Form 10-K.
Unresolved Claims Status
At December 31, 2011, our total unresolved repurchase claims
were approximately $14.3 billion compared to $10.7 billion at
December 31, 2010. 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, we 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. The
GSEs’ repurchase requests, standards for rescission of
repurchase requests and resolution processes have become
increasingly inconsistent with the GSEs’ own past conduct and
our interpretation of contractual liabilities. These developments
have resulted in an increase in claims outstanding from the GSEs.
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 we believe
was due in part to the monolines focusing recent efforts towards
litigation. Outstanding claims from whole loan, private-label