Bank of America 2013 Annual Report Download - page 209

Bank of America 2013 207
and there is not an established process for the ultimate resolution
of claims on which there is a disagreement. For further discussion
of the Corporation’s experience with whole loans and private-label
securitizations, see Whole-loan Sales and Private-label
Securitizations Experience in this Note.
The notional amount of unresolved monoline repurchase
claims totaled $1.5 billion at December 31, 2013 compared to
$2.4 billion at December 31, 2012. As a result of the MBIA
Settlement, $945 million of monoline repurchase claims
outstanding at December 31, 2012 were resolved in May 2013.
Substantially all of the unresolved monoline claims pertain to
second-lien loans and are currently the subject of litigation. As a
result, the Corporation has had limited loan-level repurchase
claims experience with the remaining monoline insurers. In the
Corporation’s experience, the monolines have been generally
unwilling to withdraw repurchase claims, regardless of whether
and what evidence was offered to refute a claim. For further
discussion of the Corporation’s practices regarding litigation
accruals and estimated range of possible loss for litigation and
regulatory matters, which includes the status of its monoline
litigation, see Estimated Range of Possible Loss in this Note and
Litigation and Regulatory Matters in Note 12 – Commitments and
Contingencies.
The notional amount of unresolved GSE repurchase claims
totaled $170 million at December 31, 2013 compared to $13.4
billion at December 31, 2012. As of December 31, 2013, the
Corporation has resolved substantially all GSE-related claims due
primarily to the settlements with FHLMC and FNMA. As a result of
the FNMA Settlement, $12.2 billion of GSE repurchase claims
outstanding at December 31, 2012 were resolved in January 2013.
As a result of the FHLMC Settlement, $646 million of claims were
resolved at the time of the settlement, of which $322 million were
outstanding at December 31, 2012. For further discussion of the
Corporation’s experience with the GSEs, see Government-
sponsored Enterprises Experience in this Note.
In addition to, and not included in, the total unresolved
repurchase claims of $19.7 billion at December 31, 2013, the
Corporation has received repurchase demands from private-label
securitization investors and a master servicer where it believes
the claimants have not satisfied the contractual thresholds to
direct the securitization trustee to take action and/or that these
demands are otherwise procedurally or substantively invalid. The
total amount outstanding of such demands was $1.2 billion,
comprised of $945 million of demands received during 2012 and
$273 million of demands related to trusts covered by the BNY
Mellon Settlement at December 31, 2013 compared to $1.6
billion at December 31, 2012. The Corporation does not believe
that the $1.2 billion of demands outstanding at December 31,
2013 are valid repurchase claims and, therefore, it is not possible
to predict the resolution with respect to such demands.
During 2013, the Corporation received $8.4 billion in new
repurchase claims, including $6.3 billion submitted by private-label
securitization trustees and a financial guarantee provider, $1.8
billion submitted by the GSEs for both Countrywide and legacy
Bank of America originations not covered by the bulk settlements
with the GSEs, $222 million submitted by whole-loan investors
and $50 million submitted by monoline insurers. During 2013,
$16.7 billion in claims were resolved, primarily with the GSEs and
through the MBIA Settlement. Of the remaining claims that were
resolved, $1.7 billion were resolved through rescissions and $1.2
billion were resolved through mortgage repurchases and make-
whole payments, primarily with the GSEs.
Liability for Representations and Warranties and
Corporate Guarantees
The liability for representations and warranties and corporate
guarantees is included in accrued expenses and other liabilities
on the Consolidated Balance Sheet and the related provision is
included in mortgage banking income (loss) in the Consolidated
Statement of Income. The liability for representations and
warranties is established when those obligations are both
probable and reasonably estimable.
The Corporation’s estimated liability at December 31, 2013 for
obligations under representations and warranties given to the
GSEs and the corresponding estimated range of possible loss
considers, and is necessarily dependent on, and limited by, a
number of factors, including the Corporation’s experience related
to actual defaults, projected future defaults, historical loss
experience, estimated home prices and other economic
conditions. The methodology also considers such factors as the
number of payments made by the borrower prior to default as well
as certain other assumptions and judgmental factors.
The Corporation’s estimate of the non-GSE representations and
warranties liability and the corresponding estimated range of
possible loss at December 31, 2013 considers, among other
things, repurchase experience based on the BNY Mellon
Settlement, adjusted to reflect differences between the Covered
Trusts and the remainder of the population of private-label
securitizations, and assumes that the conditions to the BNY Mellon
Settlement will be met. Since the non-GSE securitization trusts
that were included in the BNY Mellon Settlement differ from those
that were not included in the BNY Mellon Settlement, the
Corporation adjusted the repurchase experience implied in the
settlement in order to determine the estimated non-GSE
representations and warranties liability and the corresponding
estimated range of possible loss. The judgmental adjustments
made include consideration of the differences in the mix of
products in the subject securitizations, loan originator, likelihood
of claims expected, the differences in the number of payments
that the borrower has made prior to default and the sponsor of
the securitizations. Where relevant, the Corporation also takes
into account more recent experience, such as increased claim
activity, its experience with various counterparties and other facts
and circumstances, such as bulk settlements, as the Corporation
believes appropriate.