Bank of America 2011 Annual Report Download - page 56

54 Bank of America 2011
estimated range of possible loss. Additionally, if recent court
rulings related to monoline litigation, including one related to us,
that have allowed sampling of loan files instead of requiring a loan-
by-loan review to determine if a representations and warranties
breach has occurred are followed generally by the courts, private-
label securitization investors may view litigation as a more
attractive alternative as compared to a loan-by-loan review. For
additional information regarding these issues, see MBIA litigation
in Litigation and Regulatory Matters in Note 14 – Commitments
and Contingencies to the Consolidated Financial Statements.
Finally, although we believe that the representations and
warranties typically given in non-GSE transactions are less rigorous
and actionable than those given in GSE transactions, we do not
have significant loan-level experience in non-GSE transactions to
measure the impact of these differences on the probability that a
loan will be required to be repurchased.
The liability for obligations under representations and
warranties with respect to GSE and non-GSE exposures and the
corresponding estimated range of possible loss for non-GSE
representations and warranties exposures do not include any
losses related to litigation matters disclosed in Note 14 –
Commitments and Contingencies to the Consolidated Financial
Statements, nor do they include any separate foreclosure costs
and related costs, assessments and compensatory fees or any
possible losses related to potential claims for breaches of
performance of servicing obligations (except as such losses are
included as potential costs of the BNY Mellon Settlement),
potential securities law or fraud claims or potential indemnity or
other claims against us, including claims related to loans insured
by the FHA. We are not able to reasonably estimate the amount
of any possible loss with respect to any such servicing, securities
law (except to the extent reflected in the aggregate range of
possible loss for litigation and regulatory matters disclosed in Note
14 – Commitments and Contingencies to the Consolidated Financial
Statements), fraud or other claims against us; however, such loss
could be material.
Government-sponsored Enterprises Experience
Our current repurchase claims experience with the GSEs is
predominantly concentrated in the 2004 through 2008 origination
vintages where we believe that our exposure to representations
and warranties liability is most significant. Our repurchase claims
experience related to loans originated prior to 2004 has not been
significant and we believe that the changes made to our operations
and underwriting policies have reduced our exposure related to
loans originated after 2008.
Bank of America and legacy Countrywide sold approximately
$1.1 trillion of loans originated from 2004 through 2008 to the
GSEs. As of December 31, 2011, 11 percent of the loans in these
vintages have defaulted or are 180 days or more past due (severely
delinquent). At least 25 payments have been made on
approximately 65 percent of severely delinquent or defaulted
loans. Through December 31, 2011, we have received $32.4
billion in repurchase claims associated with these vintages,
representing approximately three percent of the loans sold to the
GSEs in these vintages. Including the agreement reached with
FNMA on December 31, 2010, we have resolved $25.7 billion of
these claims with a net loss experience of approximately 31
percent. The claims resolved and the loss rate do not include $839
million in claims extinguished as a result of the agreement with
FHLMC due to the global nature of the agreement and, specifically,
the absence of a formal apportionment of the agreement amount
between current and future claims. Our collateral loss severity rate
on approved repurchases has averaged approximately 45 to 55
percent.
Table 11 highlights our experience with the GSEs related to
loans originated from 2004 through 2008. Outstanding GSE
claims increased to $6.3 billion, primarily attributable to $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. The high
level of new claims was partially offset by the resolution of claims
with the GSEs.
Table 11
(Dollars in billions)
Original funded balance
Principal payments
Defaults
Total outstanding balance at December 31, 2011
Outstanding principal balance 180 days or more past due (severely delinquent)
Defaults plus severely delinquent
Payments made by borrower:
Less than 13
13-24
25-36
More than 36
Total payments made by borrower
Outstanding GSE representations and warranties claims (all vintages)
As of December 31, 2010
As of December 31, 2011
Cumulative GSE representations and warranties losses (2004-2008 vintages)
Overview of GSE Balances – 2004-2008 Originations
Legacy Originator
Countrywide
$ 846
(452)
(56)
$338
$50
106
Other
$ 272
(153)
(9)
$110
$12
21
Total
$ 1,118
(605)
(65)
$448
$62
127
$15
30
34
48
$127
$ 2.8
6.3
$ 9.2
Percent of
Total
12%
23
27
38
100%