Bank of America 2013 Annual Report Download - page 229

Bank of America 2013 227
Mortgage Repurchase Litigation
U.S. Bank Litigation
On August 29, 2011, U.S. Bank, National Association (U.S. Bank),
as trustee for the HarborView Mortgage Loan Trust 2005-10 (the
Trust), a mortgage pool backed by loans originated by CHL, filed a
complaint in New York Supreme Court, New York County, in a case
entitled U.S. Bank National Association, as Trustee for HarborView
Mortgage Loan Trust, Series 2005-10 v. Countrywide Home Loans,
Inc. (dba Bank of America Home Loans), Bank of America
Corporation, Countrywide Financial Corporation, Bank of America,
N.A. and NB Holdings Corporation. U.S. Bank asserts that, as a
result of alleged misrepresentations by CHL in connection with its
sale of the loans, defendants must repurchase all the loans in the
pool, or in the alternative that it must repurchase a subset of those
loans as to which U.S. Bank alleges that defendants have refused
specific repurchase demands. U.S. Bank asserts claims for breach
of contract and seeks specific performance of defendants’ alleged
obligation to repurchase the entire pool of loans (alleged to have
an original aggregate principal balance of $1.75 billion) or
alternatively the aforementioned subset (alleged to have an
aggregate principal balance of “over $100 million”), together with
reimbursement of costs and expenses and other unspecified
relief. On May 29, 2013, New York Supreme Court dismissed U.S.
Bank’s claim for repurchase of all the mortgage loans in the Trust.
The court granted U.S. Bank leave to amend this claim. The court
denied defendants’ motion to dismiss U.S. Bank’s claim that CHL
allegedly refused to repurchase specific mortgage loans which
were the subject of prior repurchase demands. On June 18, 2013,
U.S. Bank filed its second amended complaint seeking to replead
its claim for repurchase of all loans in the Trust. By order dated
February 13, 2014, the court granted defendants’ motion to
dismiss the repleaded claim seeking repurchase of all mortgage
loans in the Trust; the same order denied plaintiff’s motion for
“resettlement and/or clarification” seeking permission to pursue,
under its alternative claim, a remedy with respect to mortgage
loans beyond the subset identified in the complaint.
Ocala Litigation
Ocala Investor Actions
On November 25, 2009, BNP Paribas Mortgage Corporation and
Deutsche Bank AG each filed claims (the 2009 Actions) against
BANA in the U.S. District Court for the Southern District of New
York entitled BNP Paribas Mortgage Corporation v. Bank of America,
N.A and Deutsche Bank AG v. Bank of America, N.A. Plaintiffs allege
that BANA failed to properly perform its duties as indenture trustee,
collateral agent, custodian and depositary for Ocala Funding, LLC
(Ocala), a home mortgage warehousing facility, resulting in the loss
of plaintiffs’ investment in Ocala. Ocala was a wholly-owned
subsidiary of Taylor, Bean & Whitaker Mortgage Corp. (TBW), a
home mortgage originator and servicer which is alleged to have
committed fraud that led to its eventual bankruptcy. Ocala provided
funding for TBW’s mortgage origination activities by issuing notes,
the proceeds of which were to be used by TBW to originate home
mortgages. Such mortgages and other Ocala assets in turn were
pledged to BANA, as collateral agent, to secure the notes. Plaintiffs
lost most or all of their investment in Ocala when, as the result of
the alleged fraud committed by TBW, Ocala was unable to repay
the notes purchased by plaintiffs and there was insufficient
collateral to satisfy Ocala’s debt obligations. Plaintiffs allege that
BANA breached its contractual, fiduciary and other duties to Ocala,
thereby permitting TBW’s alleged fraud to go undetected. Plaintiffs
seek compensatory damages and other relief from BANA, including
interest and attorneys’ fees, in an unspecified amount, but which
plaintiffs allege exceeds $1.6 billion.
On March 23, 2011, the court issued an order granting in part
and denying in part BANA’s motions to dismiss the 2009 Actions.
Plaintiffs filed amended complaints on October 1, 2012 that
included additional contractual, tort and equitable claims. On June
6, 2013, the court issued an order granting BANA’s motion to
dismiss plaintiffs’ claims for failure to sue, negligence, negligent
misrepresentation and equitable relief. On December 9, 2013, the
court issued an order denying plaintiffs’ motion for leave to amend
to include additional failure to sue claims.
In connection with the Ocala bankruptcy proceeding, the
bankruptcy trustee is pursuing litigation against third parties to
mitigate the investor losses at issue in the 2009 Actions.
FDIC Action
On October 1, 2010, BANA filed suit in the U.S. District Court for
the District of Columbia against the FDIC as receiver of Colonial
Bank, TBW’s primary bank, and Platinum Community Bank
(Platinum, a wholly-owned subsidiary of TBW) entitled Bank of
America, National Association as indenture trustee, custodian and
collateral agent for Ocala Funding, LLC v. Federal Deposit Insurance
Corporation (the FDIC Action). The suit seeks judicial review of the
FDIC’s denial of the administrative claims brought by BANA in the
FDIC’s Colonial and Platinum receivership proceedings. BANA’s
claims allege that Ocala’s losses were in whole or in part the result
of Colonial and Platinum’s participation in TBW’s alleged fraud.
BANA seeks a court order requiring the FDIC to allow BANA’s claims
in an amount equal to Ocala’s losses and, accordingly, to permit
BANA, as trustee, collateral agent, custodian and depositary for
Ocala, to share appropriately in distributions of any receivership
assets that the FDIC makes to creditors of the two failed banks.
On August 5, 2011, the FDIC answered and moved to dismiss
the amended complaint, and asserted counterclaims against
BANA in BANA’s individual capacity seeking approximately $900
million in damages. The counterclaims allege that Colonial sent
4,808 loans to BANA as bailee, that BANA converted the loans
into Ocala collateral without first ensuring that Colonial was paid,
and that Colonial was never paid for these loans.
On December 10, 2012, the U.S. District Court for the District
of Columbia granted in part and denied in part the FDIC’s motion
to dismiss BANA’s amended complaint. The court dismissed
BANA’s claims to the extent they were brought on behalf of Ocala,
holding that those claims were not administratively exhausted, and
also dismissed three equitable claims, but allowed BANA to
continue to pursue claims in its individual capacity and on behalf
of Ocala’s secured parties, principally plaintiffs in the 2009
Actions. The court also granted in part and denied in part BANA’s
motion to dismiss the FDIC’s counterclaims, allowing all but one
of the FDIC’s 16 counterclaims to go forward.
On February 5, 2013, BANA filed a motion for clarification of
the court’s December 10, 2012 ruling on BANA’s motion to dismiss
the FDIC’s counterclaims. On March 6, 2013, the court ruled that
certain language in the custodial agreement between BANA and
Colonial Bank purporting to limit BANA’s liability is unenforceable
due to ambiguity, and that BANA is foreclosed from introducing
extrinsic evidence to resolve the ambiguity. On June 17, 2013, the
court denied BANA’s motion seeking certification for interlocutory
appeal of the court’s December 10, 2012 ruling as so clarified.
On February 5, 2014, the U.S. Court of Appeals for the District of