Bank of America 2012 Annual Report Download - page 53

Bank of America 2012 51
Representations and Warranties Bulk Settlement Actions
We have settled, or entered into agreements to settle, certain bulk
representations and warranties claims (1) with a trustee (the
Trustee) for certain legacy Countrywide private-label securitization
trusts (the BNY Mellon Settlement); (2) with two monoline insurers,
Assured Guaranty Ltd. and subsidiaries (the Assured Guaranty
Settlement), and Syncora Guarantee Inc. and Syncora Holdings,
Ltd. (the Syncora Settlement), (3) with each of the GSEs in 2010
(2010 GSE Agreements), and (4) with FNMA pursuant to the FNMA
Settlement in 2013.
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. However, there can be
no assurance that we will reach future settlements or, if we do,
that the terms of past settlements can be relied upon to predict
the terms of future settlements. These bulk settlements generally
did 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. For a summary of the larger bulk
settlement actions taken in the past few years and the related
impact on the representations and warranties provision and
liability, see Note 8 – Representations and Warranties Obligations
and Corporate Guarantees and Note 13 – Commitments and
Contingencies to the Consolidated Financial Statements.
FNMA Settlement and 2010 GSE Agreements
On January 6, 2013, we entered into the FNMA Settlement to
resolve substantially all outstanding and potential repurchase and
certain other claims relating to the origination, sale and delivery
of residential mortgage loans originated and sold directly to FNMA
from January 1, 2000 through December 31, 2008 by entities
related to legacy Countrywide and BANA.
The FNMA Settlement covers loans with an aggregate original
principal balance of approximately $1.4 trillion and an aggregate
outstanding principal balance of approximately $300 billion.
Unresolved repurchase claims submitted by FNMA for alleged
breaches of selling representations and warranties with respect
to these loans totaled $12.2 billion of unpaid principal balance at
December 31, 2012. The FNMA Settlement extinguished
substantially all of those unresolved repurchase claims, as well
as substantially all future representations and warranties
repurchase claims associated with such loans, subject to certain
exceptions which we do not expect to be material.
In January 2013, we made a cash payment to FNMA of $3.6
billion and also repurchased for $6.6 billion certain residential
mortgage loans that had previously been sold to FNMA, which we
have valued at less than the purchase price.
The FNMA Settlement also clarified the parties’ obligations
with respect to MI including establishing timeframes for certain
payments and other actions, setting parameters for potential bulk
settlements and providing for cooperation in future dealings with
mortgage insurers. For additional information, see Open Mortgage
Insurance Rescission Notices on page 53.
In addition, we settled substantially all of FNMA’s outstanding
and future claims for compensatory fees arising out of past
foreclosure delays. For additional information, see Other Mortgage-
related Matters – Impact of Foreclosure Delays on page 59.
On December 31, 2010, we entered into the 2010 GSE
Agreements, which extinguished certain claims arising out of
alleged breaches of selling representations and warranties related
to loans sold directly by legacy Countrywide to the GSEs. The
FHLMC agreement extinguished all such claims for loans sold to
FHLMC through 2008, subject to certain exceptions, while the
FNMA agreement substantially resolved the existing pipeline of
such claims outstanding as of September 20, 2010.
Monoline Settlements
On July 17, 2012, we 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.
On April 14, 2011, Bank of America, including our legacy
Countrywide affiliates, entered into an agreement with Assured
Guaranty Ltd. and subsidiaries (Assured Guaranty), to resolve all
of the monoline insurer’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.
BNY Mellon Settlement
The BNY Mellon Settlement is subject to final court approval and
certain other conditions. On August 10, 2012, the Court issued
an order setting a schedule for discovery and other proceedings,
and setting May 30, 2013 as the date for the final court hearing
on the settlement to begin. We are not a party to the proceeding.
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 trusts among the 525 legacy Countrywide
first-lien and five second-lien non-GSE securitization trusts
(Covered Trusts) holding loans with an 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.
It is not currently possible to predict how many parties 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, 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.