Bank of America 2013 Annual Report Download - page 51

Bank of America 2013 49
We may reach other settlements in the future if opportunities
arise on terms we believe to be advantageous. However, there can
be no assurance that we will reach future settlements or, if we do,
that the terms of past settlements can be relied upon to predict
the terms of future settlements. These bulk settlements generally
did not cover all transactions with the relevant counterparties or
all potential claims that may arise, including in some instances
securities law, fraud and servicing claims. For example, we are
currently involved in MBS litigation including purported class action
suits, actions brought by individual MBS purchases, actions
brought by FHFA as conservator for the GSEs and governmental
actions. Our liability in connection with the transactions and claims
not covered by these settlements could be material. For more
information on our exposure to RMBS matters involving securities
law, fraud or related claims, see Note 12 – Commitments and
Contingencies to the Consolidated Financial Statements.
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.
Although, we are not a party to the proceeding, certain of our
rights and obligations under the settlement agreement are
conditioned on final court approval of the settlement. There can
be no assurance final court approval 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 we and Countrywide will not withdraw from
the settlement. If final court approval is not obtained, or if we and
Countrywide withdraw from the BNY Mellon Settlement in
accordance with its terms, our future representations and
warranties losses could be substantially different from existing
accruals and the estimated range of possible loss over existing
accruals.
For a summary of the larger bulk settlement actions and the
related impact on the representations and warranties provision
and liability, see Note 7 – Representations and Warranties
Obligations and Corporate Guarantees and Note 12 – Commitments
and Contingencies to the Consolidated Financial Statements.
Unresolved Repurchase Claims
Repurchase claims received from a counterparty are considered
unresolved repurchase claims until the underlying loan is
repurchased, the claim is rescinded by the counterparty or the
claim is otherwise settled. Unresolved 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. When a claim
is denied and we do not receive a response from the counterparty,
the claim remains in the unresolved repurchase claims balance
until resolution.
Table 12 presents unresolved repurchase claims by
counterparty at December 31, 2013 and 2012.
Table 12 Unresolved Repurchase Claims by
Counterparty (1, 2)
December 31
(Dollars in millions) 2013 2012
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 (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.
(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 included
$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 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 impact
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 us to respond to the
claim. We expect unresolved repurchase claims related to private-
label securitizations to increase as such claims continue to be
submitted and there is not an established process for the ultimate
resolution of such claims on which there is a disagreement.