Bank of America 2013 Annual Report Download - page 224

222 Bank of America 2013
what the Corporation believes to be an estimate of possible loss
only for certain matters meeting these criteria. It does not
represent the Corporation’s maximum loss exposure.
Information is provided below regarding the nature of all of
these contingencies and, where specified, the amount of the claim
associated with these loss contingencies. Based on current
knowledge, management does not believe that loss contingencies
arising from pending matters, including the matters described
herein, will have a material adverse effect on the consolidated
financial position or liquidity of the Corporation. However, in light
of the inherent uncertainties involved in these matters, some of
which are beyond the Corporation’s control, and the very large or
indeterminate damages sought in some of these matters, an
adverse outcome in one or more of these matters could be material
to the Corporation’s results of operations or cash flows for any
particular reporting period.
Bond Insurance Litigation
Ambac Countrywide Litigation
The Corporation, Countrywide and other Countrywide entities are
named as defendants in an action filed on September 29, 2010
and as amended on May 28, 2013, by Ambac Assurance
Corporation and the Segregated Account of Ambac Assurance
Corporation (together, Ambac), entitled Ambac Assurance
Corporation and The Segregated Account of Ambac Assurance
Corporation v. Countrywide Home Loans, Inc., et al. This action,
currently pending in New York Supreme Court, New York County,
relates to bond insurance policies provided by Ambac on certain
securitized pools of second-lien (and in one pool, first-lien) home
equity lines of credit (HELOCs), first-lien subprime home equity
loans and fixed-rate second-lien mortgage loans. Plaintiffs allege
that they have paid claims as a result of defaults in the underlying
loans and assert that the Countrywide defendants misrepresented
the characteristics of the underlying loans and breached certain
contractual representations and warranties regarding the
underwriting and servicing of the loans. Plaintiffs also allege that
the Corporation is liable based on successor liability theories.
Damages claimed by Ambac are in excess of $2.5 billion and
include the amount of payments for current and future claims it
has paid or claims it will be obligated to pay under the policies,
increasing over time as it pays claims under relevant policies, plus
unspecified punitive damages.
Ambac First Franklin Litigation
On April 16, 2012, Ambac sued First Franklin Financial Corp., BANA,
Merrill Lynch, Pierce, Fenner & Smith (MLPF&S), Merrill Lynch
Mortgage Lending, Inc. (MLML), and Merrill Lynch Mortgage
Investors, Inc. in New York Supreme Court, New York County.
Plaintiffs’ claims relate to guaranty insurance Ambac provided on
a First Franklin securitization (Franklin Mortgage Loan Trust, Series
2007-FFC). The securitization was sponsored by MLML, and certain
certificates in the securitization were insured by Ambac. The
complaint alleges that defendants breached representations and
warranties concerning the origination of the underlying mortgage
loans and asserts claims for fraudulent inducement, breach of
contract and indemnification. Plaintiffs also assert breach of
contract claims against BANA based upon its servicing of the loans
in the securitization. The complaint does not specify the amount
of damages sought.
On July 19, 2013, the court denied defendants’ motion to
dismiss Ambac’s contract and fraud causes of action but granted
dismissal of Ambac’s indemnification cause of action. In addition,
the court denied defendants’ motion to dismiss Ambac’s claims
for attorneys’ fees and punitive damages.
FGIC
The Corporation, Countrywide and other Countrywide entities are
named as defendants in an action filed on December 11, 2009
by Financial Guaranty Insurance Company (FGIC) entitled Financial
Guaranty Insurance Co. v. Countrywide Home Loans, Inc., et al. This
action, currently pending in New York Supreme Court, New York
County, relates to bond insurance policies provided by FGIC on
securitized pools of HELOCs and fixed-rate second-lien mortgage
loans. Plaintiff alleges that it has paid claims as a result of defaults
in the underlying loans and asserts that the Countrywide
defendants misrepresented the characteristics of the underlying
loans and breached certain contractual representations and
warranties regarding the underwriting and servicing of the loans.
Plaintiffs also allege that the Corporation is liable based on
successor liability theories. Damages claimed by FGIC are in
excess of $1.8 billion and include the amount of payments for
current and future claims it has paid or claims it will be obligated
to pay under the policies, increasing over time as it pays claims
under relevant policies, plus unspecified punitive damages.
Credit Card Debt Cancellation and Identity Theft
Protection Products
FIA has received inquiries from and has been in discussions with
regulatory authorities to address concerns regarding the sale and
marketing of certain optional credit card debt cancellation
products. The Corporation may be subject to a regulatory
enforcement action and will be required to pay restitution or provide
other relief to customers, and pay penalties to one or more
regulators.
In addition, BANA and FIA have been in discussions with
regulatory authorities to address concerns that some customers
may have paid for but did not receive certain benefits of optional
identity theft protection services from third-party vendors of BANA
and FIA, including whether appropriate oversight of such vendors
existed. The Corporation has issued and will continue to issue
refund checks to impacted customers and may be subject to
regulatory enforcement actions and penalties.
European Commission – Credit Default Swaps Antitrust
Investigation
On July 1, 2013, the European Commission (Commission)
announced that it had addressed a Statement of Objections (SO)
to the Corporation, BANA and Banc of America Securities LLC
(together, the Bank of America Entities); a number of other financial
institutions; Markit Group Limited; and the International Swaps
and Derivatives Association (together, the Parties). The SO sets
forth the Commission’s preliminary conclusion that the Parties
infringed European Union competition law by participating in
alleged collusion to prevent exchange trading of CDS and futures.
According to the SO, the conduct of the Bank of America Entities
took place between August 2007 and April 2009. As part of the
Commission’s procedures, the Parties have been given the
opportunity to review the evidence in the investigative file, respond
to the Commission’s preliminary conclusions and request a
hearing before the Commission. If the Commission is satisfied