Bank of America 2012 Annual Report Download - page 211

Bank of America 2012 209
mortgage insurers. For additional information, see Mortgage
Insurance Rescission Notices in this Note.
In addition, pursuant to a separate agreement, the Corporation
settled substantially all of FNMA’s outstanding and future claims
for compensatory fees arising out of past foreclosure delays.
Collectively, these agreements are the FNMA Settlement.
Monoline Settlements
Syncora Settlement
On July 17, 2012, the Corporation entered into a settlement with
a monoline insurer, Syncora Guarantee Inc. and Syncora Holdings,
Ltd. (Syncora), to resolve all of Syncora’s outstanding and potential
claims related to alleged representations and warranties breaches
involving eight first- and six second-lien private-label securitization
trusts where it provided financial guarantee insurance. The
settlement covers private-label securitization trusts that had an
original principal balance of first-lien mortgages of approximately
$9.6 billion and second-lien mortgages of approximately $7.7
billion. The settlement provided for a cash payment of $375 million
to Syncora and other transactions to terminate certain other
relationships among the parties.
Settlement with Assured Guaranty
On April 14, 2011, the Corporation, including its legacy
Countrywide affiliates, entered into a settlement with Assured
Guaranty to resolve all of Assured Guaranty’s outstanding and
potential repurchase claims related to alleged representations and
warranties breaches involving 21 first- and eight second-lien RMBS
trusts where Assured Guaranty provided financial guarantee
insurance. The settlement resolves historical loan servicing issues
and other potential liabilities with respect to those trusts. The
settlement covers RMBS trusts that 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
settlement provided for cash payments totaling approximately
$1.1 billion to Assured Guaranty, a loss-sharing reinsurance
arrangement with an expected value of approximately $470 million
at the time of the settlement and other terms, including termination
of certain derivative contracts. As a result of the settlement, the
Corporation recorded consumer loans and the related trust debt
on its Consolidated Balance Sheet due to the establishment of
reinsurance contracts at the time of the settlement. The amount
of these consumer loans and the related trust debt was $900
million and $2.2 billion at December 31, 2012 and 2011.
Settlement with the Bank of New York Mellon, as Trustee
On June 28, 2011, the Corporation, BAC Home Loans Servicing,
LP (BAC HLS, which was subsequently merged with and into BANA
in July 2011), and its legacy Countrywide affiliates entered into a
settlement agreement with Bank of New York Mellon (BNY Mellon)
as trustee (the Trustee), to resolve all outstanding and potential
claims related to alleged representations and warranties breaches
(including repurchase claims), substantially all historical loan
servicing claims and certain other historical claims with respect
to 525 legacy Countrywide first-lien and five second-lien non-GSE
residential mortgage-backed securitization trusts (the Covered
Trusts) containing loans principally originated between 2004 and
2008 for which BNY Mellon acts as trustee or indenture trustee
(BNY Mellon Settlement). The Covered Trusts had an original
principal balance of approximately $424 billion, of which $409
billion was originated between 2004 and 2008, and total
outstanding principal and unpaid principal balance of loans that
had defaulted (collectively unpaid principal balance) of
approximately $220 billion at June 28, 2011, of which $217 billion
was originated between 2004 and 2008. The BNY Mellon
Settlement is supported by a group of 22 institutional investors
(the Investor Group) and is subject to final court approval and
certain other conditions.
The BNY Mellon Settlement provides for a cash payment of
$8.5 billion (the Settlement Payment) to the Trustee for distribution
to the Covered Trusts after final court approval of the BNY Mellon
Settlement. In addition to the Settlement Payment, the Corporation
is obligated to pay attorneys’ fees and costs to the Investor Group’s
counsel as well as all fees and expenses incurred by the Trustee
related to obtaining final court approval of the BNY Mellon
Settlement and certain tax rulings, which are currently estimated
at $100 million.
The BNY Mellon Settlement does not cover a small number of
legacy Countrywide-issued first-lien non-GSE RMBS transactions
with loans originated principally between 2004 and 2008 for
various reasons, including for example, six legacy Countrywide-
issued first-lien non-GSE RMBS transactions in which BNY Mellon
is not the trustee. The BNY Mellon Settlement also does not cover
legacy Countrywide-issued second-lien securitization transactions
in which a monoline insurer or other financial guarantor provides
financial guaranty insurance. In addition, because the settlement
is with the Trustee on behalf of the Covered Trusts and releases
rights under the governing agreements for the Covered Trusts, the
settlement does not release investors’ securities law or fraud
claims based upon disclosures made in connection with their
decision to purchase, sell or hold securities issued by the Covered
Trusts. To date, various investors, including certain members of
the Investor Group, are pursuing securities law or fraud claims
related to one or more of the Covered Trusts. The Corporation is
not able to determine whether any additional securities law or fraud
claims will be made by investors in the Covered Trusts. For
information about mortgage-related securities law or fraud claims,
see Litigation and Regulatory Matters in Note 13 – Commitments
and Contingencies. For those Covered Trusts where a monoline
insurer or other financial guarantor has an independent right to
assert repurchase claims directly, the BNY Mellon Settlement does
not release such insurer’s or guarantor’s repurchase claims.
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; seven 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 Federal Deposit Insurance Corporation (FDIC) and the
Federal Housing Finance Agency (FHFA). Bank of America is not a
party to the proceeding.