Bank of America 2013 Annual Report Download - page 228

226 Bank of America 2013
Merrill Lynch & Co., Inc., et al. (the FHFA Merrill Lynch Litigation).
The complaints assert certain MBS Claims relating to MBS issued
and/or underwritten by the Corporation, Merrill Lynch and related
entities in 23 MBS offerings and in 72 MBS offerings, respectively,
between 2005 and 2008 and allegedly purchased by either FNMA
or FHLMC in their investment portfolio. FHFA seeks, among other
relief, rescission of the consideration paid for the securities or
alternatively damages allegedly incurred by FNMA and FHLMC,
including consequential damages. FHFA also seeks recovery of
punitive damages in the FHFA Merrill Lynch Litigation.
On November 8, 2012 and November 28, 2012, the court
denied motions to dismiss in the FHFA Merrill Lynch Litigation and
the FHFA Bank of America Litigation, respectively.
On December 16, 2013, the district court granted FHFA’s
motion for partial summary judgment, ruling that loss causation
is not an element of, or a defense to, FHFA’s claims under Virginia
or Washington, D.C. blue sky laws. The FHFA Merrill Lynch Litigation
is set for trial in June 2014; the FHFA Bank of America Litigation
is set for trial in January 2015.
Federal Home Loan Bank Litigation
On January 18, 2011, the Federal Home Loan Bank of Atlanta
(FHLB Atlanta) filed a complaint asserting certain MBS Claims
against the Corporation, Countrywide and other Countrywide
entities in Georgia State Court, Fulton County, entitled Federal
Home Loan Bank of Atlanta v. Countrywide Financial Corporation,
et al. FHLB Atlanta sought rescission of its purchases or a
rescissory measure of damages, unspecified punitive damages
and other unspecified relief in connection with its alleged purchase
of 16 MBS offerings issued and/or underwritten by Countrywide-
related entities between 2004 and 2007. Pursuant to a settlement
that was fully accrued as of December 31, 2013 and is not material
to the Corporation’s results of operations, FHLB Atlanta voluntarily
dismissed its claims with prejudice on December 9, 2013.
On March 15, 2010, the Federal Home Loan Bank of San
Francisco (FHLB San Francisco) filed an action in California
Superior Court, San Francisco County, entitled Federal Home Loan
Bank of San Francisco v. Credit Suisse Securities (USA) LLC, et al.
FHLB San Francisco’s complaint asserts certain MBS Claims
against BAS, Countrywide and several related entities in
connection with its alleged purchase of 51 MBS offerings and one
private placement issued and/or underwritten by those defendants
between 2004 and 2007 and seeks rescission and unspecified
damages. FHLB San Francisco dismissed the federal claims with
prejudice on August 11, 2011. On September 8, 2011, the court
denied defendants’ motions to dismiss the state law claims. On
December 20, 2013, FHLB San Francisco voluntarily dismissed
its negligent misrepresentation claims with prejudice.
Luther Class Action Litigation and Related Actions
Beginning in 2007, a number of pension funds and other investors
filed putative class action lawsuits alleging certain MBS Claims
against Countrywide, several of its affiliates, MLPF&S, the
Corporation, NB Holdings Corporation and certain other
defendants. Those class action lawsuits concerned a total of 429
MBS offerings involving over $350 billion in securities issued by
subsidiaries of Countrywide between 2005 and 2007. The actions,
entitled Luther v. Countrywide Financial Corporation, et al., Maine
State Retirement System v. Countrywide Financial Corporation, et
al., Western Conference of Teamsters Pension Trust Fund v.
Countrywide Financial Corporation, et al., and Putnam Bank v.
Countrywide Financial Corporation, et al., were all eventually
assigned to the Countrywide RMBS MDL court. On December 6,
2013, the court granted final approval to a settlement of these
actions in the amount of $500 million. Beginning on January 14,
2014, a number of class members filed notices of appeal in the
U.S. Court of Appeals for the Ninth Circuit.
Prudential Insurance Litigation
On March 14, 2013, The Prudential Insurance Company of America
and certain of its affiliates (collectively Prudential) filed a complaint
in the U.S. District Court for the District of New Jersey, in a case
entitled Prudential Insurance Company of America, et al. v. Bank of
America, N.A., et al. Prudential has named the Corporation, Merrill
Lynch and a number of related entities as defendants. Prudential’s
complaint asserts certain MBS Claims pertaining to 54 MBS
offerings in which Prudential alleges that it purchased securities
between 2004 and 2007. Prudential seeks, among other relief,
compensatory damages, rescission or a rescissory measure of
damages, treble damages, punitive damages and other
unspecified relief.
Regulatory and Governmental Investigations
The Corporation has received a number of subpoenas and other
requests for information from regulators and governmental
authorities regarding MBS and other mortgage-related matters,
including inquiries, investigations and potential proceedings
related to a number of transactions involving the underwriting and
issuance of MBS by the Corporation (including legacy entities the
Corporation acquired) and participation in certain CDO and
structured investment vehicle offerings. These inquiries and
investigations include, among others, investigations by the RMBS
Working Group of the Financial Fraud Enforcement Task Force,
including the DOJ and state Attorneys General, concerning the
purchase, securitization and underwriting of mortgage loans and
RMBS. The Corporation has provided documents and testimony,
and continues to cooperate fully with these inquiries and
investigations.
The staff of the NYAG has advised that they intend to
recommend filing an action against MLPF&S as a result of their
RMBS investigation. In addition, the staff of a U.S. Attorney’s office
advised that they intend to recommend that the DOJ file a civil
action against affiliates of the Corporation related to the
securitization of RMBS.
The Civil Division of the U.S. Attorney’s office for the Eastern
District of New York is conducting an investigation concerning the
Corporation's compliance with the requirements of the Federal
Housing Administration’s Direct Endorsement Program. The
Corporation is cooperating with this investigation.
On December 12, 2013, the SEC and MLPF&S resolved the
SEC’s investigation related to risk control, valuation, structuring,
marketing and purchase of CDOs by MLPF&S. Without admitting
or denying the SEC’s allegations in the settlement order, MLPF&S
agreed to pay disgorgement, prejudgment interest and a civil
penalty totaling approximately $132 million relating to MLPF&S’s
role in the structuring and marketing of three CDOs that closed in
late 2006 and early 2007.