Bank of America 2012 Annual Report Download - page 58

56 Bank of America 2012
not advanced funds or does not anticipate that it will be required
to advance funds to the securitization trust, the likelihood of
receiving a repurchase claim from a monoline may be reduced as
the monoline would receive limited or no benefit from the payment
of repurchase claims. Moreover, some monolines are not currently
performing their obligations under the financial guaranty policies
they issued which may, in certain circumstances, impact their
ability to present repurchase claims; although in those
circumstances, trustees can bring repurchase claims, including at
the direction of investors if contractual thresholds are met.
Table 12 details the population of loans originated between
2004 and 2008 and the population of loans sold as whole loans
or in non-agency securitizations by entity and product together with
the defaulted and severely delinquent loans stratified by the
number of payments the borrower made prior to default or
becoming severely delinquent as of December 31, 2012. We
believe many of the defaults observed in these securitizations
have been, and continue to be, driven by external factors like the
substantial depreciation in home prices, persistently high
unemployment and other negative economic trends, diminishing
the likelihood that any loan defect (assuming one exists at all) was
the cause of a loan’s default. As of December 31, 2012,
approximately 25 percent of the loans sold to non-GSEs that were
originated between 2004 and 2008 have defaulted or are severely
delinquent. Of the original principal balance for Countrywide, $409
billion is included in the BNY Mellon Settlement and of this amount
$112 billion was defaulted or severely delinquent at December 31,
2012.
Table 12 Overview of Non-Agency Securitization and Whole Loan Balances
Principal Balance Defaulted or Severely Delinquent
(Dollars in billions)
By Entity
Original
Principal
Balance
Outstanding
Principal
Balance
December
31, 2012
Outstanding
Principal
Balance
180 Days or
More
Past Due
Defaulted
Principal
Balance
Defaulted or
Severely
Delinquent
Borrower
Made
Less than 13
Payments
Borrower
Made
13 to 24
Payments
Borrower
Made
25 to 36
Payments
Borrower
Made
More than 36
Payments
Bank of America $ 100$ 22$ 4$ 6$ 10$ 1$ 2$ 2$ 5
Countrywide 716 204 58 131 189 25 46 46 72
Merrill Lynch 65 16 4 13 173437
First Franklin 8218 5232856512
Total (1, 2) $ 963 $ 260 $ 71 $ 173 $ 244 $ 34 $ 58 $56 $ 96
By Product
Prime $ 302$ 83$ 11$ 23$ 34$ 2$ 6$ 7$ 19
Alt-A 172 58 15 35 50 8 12 12 18
Pay option 150 43 19 37 56 5 14 16 21
Subprime 245 63 24 58 82 17 20 17 28
Home Equity 88 12 — 18 18 2 5 4 7
Other 6 1 2 2 4 — 1 — 3
Total $ 963 $ 260 $ 71 $ 173 $ 244 $ 34 $ 58 $56 $ 96
(1) Excludes transactions sponsored by Bank of America and Merrill Lynch where no representations or warranties were made.
(2) Includes exposures on third-party sponsored transactions related to legacy entity originations.
Monoline Insurers
Legacy companies sold $184.5 billion of loans originated between
2004 and 2008 into monoline-insured securitizations, which are
included in Table 12, including $103.9 billion of first-lien
mortgages and $80.6 billion of second-lien mortgages. Of these
balances, $48.9 billion of the first-lien mortgages and $51.8 billion
of the second-lien mortgages have been paid in full and $35.1
billion of the first-lien mortgages and $17.6 billion of the second-
lien mortgages have defaulted or are severely delinquent at
December 31, 2012. At least 25 payments have been made on
approximately 56 percent of the defaulted and severely delinquent
loans. Of the first-lien mortgages sold, $39.1 billion, or 38 percent,
were sold as whole loans to other institutions which subsequently
included these loans with those of other originators in private-label
securitization transactions in which the monolines insured one or
more securities.
As of December 31, 2012, we have received $6.0 billion of
representations and warranties repurchase claims associated with
these vintages from the monoline insurers related to the monoline-
insured transactions, predominately second-lien transactions. Of
these repurchase claims, $2.4 billion were resolved through the
Assured Guaranty and Syncora Settlements, $816 million were
resolved through repurchase or indemnification with losses of
$649 million, and $302 million were rescinded by the monoline
insurers or paid in full. Our limited experience with most of the
monoline insurers has varied in terms of process, and experience
with these counterparties has not been predictable. Our limited
claims experience with the monoline insurers in the repurchase
process is a result of these monoline insurers having instituted
litigation against legacy Countrywide and/or Bank of America,
which impacts our ability to enter into constructive dialogue with
these monolines to resolve the open claims.
At December 31, 2012, for loans originated between 2004 and
2008, the unpaid principal balance of loans related to unresolved
monoline repurchase claims was $2.4 billion, substantially all of
which we have reviewed and declined to repurchase based on an
assessment of whether a material breach exists. At December 31,
2012, the unpaid principal balance of loans in these vintages for
which the monolines had requested loan files for review but for
which no repurchase claim had been received was $5.3 billion,
excluding loans that had been paid in full or resolved through
settlements. Of these file requests, $4.0 billion are aged and
subject to ongoing litigation. There will likely be additional requests
for loan files in the future leading to repurchase claims. In addition,
we have received claims from private-label securitization trustees
and a third-party securitization sponsor related to first-lien third-
party sponsored securitizations that include monoline insurance.