Bank of America 2013 Annual Report Download - page 208

206 Bank of America 2013
The BNY Mellon Settlement remains subject to final court
approval and certain other conditions. It is not currently possible
to predict the ultimate outcome or timing of the court approval
process, which can include appeals and could take a substantial
period of time. The court approval hearing began in the New York
Supreme Court, New York County, on June 3, 2013 and concluded
on November 21, 2013. On January 31, 2014, the court issued
a decision, order and judgment approving the BNY Mellon
Settlement. The court overruled the objections to the settlement,
holding that the Trustee, BNY Mellon, acted in good faith, within
its discretion and within the bounds of reasonableness in
determining that the settlement agreement was in the best
interests of the covered trusts. The court declined to approve the
Trustee’s conduct only with respect to the Trustee’s consideration
of a potential claim that a loan must be repurchased if the servicer
modifies its terms. On February 4, 2014, one of the objectors filed
a motion to stay entry of judgment and to hold additional
proceedings in the trial court on issues it alleged had not been
litigated or decided by the court in its January 31, 2014 decision,
order and judgment. On February 18, 2014, the same objector
also filed a motion for reargument of the trial court’s January 31,
2014 decision. The court held a hearing on the motion to stay on
February 19, 2014, and rejected the application for stay and for
further proceedings in the trial court. The court also ruled it would
not hold oral argument on the objector’s motion for reargument
before April 2014. On February 21, 2014, final judgment was
entered and the Trustee filed a notice of appeal regarding the
court’s ruling on loan modification claims in the settlement. The
court’s January 31, 2014 decision, order and judgment remain
subject to appeal and the motion to reargue, and it is not possible
to predict the timetable for appeals or when the court approval
process will be completed.
If final court approval is not obtained by December 31, 2015,
the Corporation and Countrywide may withdraw from the BNY
Mellon Settlement, if the Trustee consents. The BNY Mellon
Settlement also provides that if 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, the Corporation and 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
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 the
Corporation and Countrywide will not withdraw from the settlement.
If final court approval is not obtained or if the Corporation and
Countrywide withdraw from the BNY Mellon Settlement in
accordance with its terms, the Corporation’s future
representations and warranties losses could be substantially
different from existing accruals and the estimated range of
possible loss over existing accruals described under Whole-loan
Sales and Private-label Securitizations Experience in this Note.
Unresolved Repurchase Claims
Unresolved representations and warranties repurchase claims
represent the notional amount of repurchase claims made by
counterparties, typically the outstanding principal balance or the
unpaid principal balance at the time of default. In the case of first-
lien mortgages, the claim amount is often significantly greater than
the expected loss amount due to the benefit of collateral and, in
some cases, MI or mortgage guarantee payments. Claims received
from a counterparty remain outstanding until the underlying loan
is repurchased, the claim is rescinded by the counterparty, or the
claim is otherwise resolved. When a claim is denied and the
Corporation does not receive a response from the counterparty,
the claim remains in the unresolved repurchase claims balance
until resolution.
The table below presents unresolved repurchase claims at
December 31, 2013 and 2012. The unresolved repurchase claims
include only claims where the Corporation believes that the
counterparty has the contractual right to submit claims. For
additional information, see Whole-loan Sales and Private-label
Securitizations Experience in this Note and Note 12 – Commitments
and Contingencies. These repurchase claims do not include any
repurchase claims related to the BNY Mellon Settlement regarding
the Covered Trusts.
Unresolved Repurchase Claims by Counterparty and
Product Type (1, 2)
December 31
(Dollars in millions) 2013 2012
By counterparty
Private-label securitization trustees, whole-loan
investors, including third-party securitization
sponsors and other (3) $ 17,953 $ 12,222
Monolines 1,532 2,442
GSEs 170 13,437
Total unresolved repurchase claims by counterparty (3) $ 19,655 $ 28,101
By product type
Prime loans $ 623 $ 8,724
Alt-A 1,536 5,422
Home equity 1,889 2,390
Pay option 5,776 5,877
Subprime 7,502 4,227
Other 2,329 1,461
Total unresolved repurchase claims by product type (3) $ 19,655 $ 28,101
(1) The total notional amount of unresolved repurchase claims does not include any repurchase
claims related to the trusts covered by the BNY Mellon Settlement.
(2) At December 31, 2013 and 2012, unresolved repurchase claims did not include repurchase
demands of $1.2 billion and $1.6 billion where the Corporation believes the claimants have
not satisfied the contractual thresholds as noted on page 206.
(3) Includes $13.8 billion and $11.7 billion of claims based on individual file reviews and $4.1
billion and $519 million of claims submitted without individual file reviews at December 31,
2013 and 2012.
The notional amount of unresolved repurchase claims from
private-label securitization trustees, whole-loan investors,
including third-party securitization sponsors, and others totaled
$18.0 billion at December 31, 2013 compared to $12.2 billion at
December 31, 2012, including $13.8 billion and $11.7 billion of
claims based on individual file reviews and $4.1 billion and $519
million of claims submitted without individual file reviews. The
increase in the notional amount of unresolved repurchase claims
during 2013 is primarily due to continued submission of claims
by private-label securitization trustees; the level of detail, support
and analysis accompanying such claims, which impacts overall
claim quality and, therefore, claims resolution; and the lack of an
established process to resolve disputes related to these claims.
For example, claims submitted without individual file reviews lack
the level of detail and analysis of individual loans found in other
claims that is necessary for the Corporation to respond to the
claim. The Corporation expects unresolved repurchase claims
related to private-label securitizations to increase as claims
continue to be submitted by private-label securitization trustees