Bank of America 2013 Annual Report Download - page 52

50 Bank of America 2013
In addition to, and not included in, the total unresolved
repurchase claims, we have received repurchase demands from
private-label securitization investors and a master servicer where
we believe 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 decrease in outstanding
demands is a result of certain demands that were replaced by
repurchase claims submitted by trustees, which are included in
Table 12. We do not believe that the demands outstanding at
December 31, 2013 represent valid repurchase claims and,
therefore, it is not possible to predict the resolution with respect
to such demands.
The decline in unresolved monoline claims is primarily due to
the MBIA Settlement. Substantially all of the remaining unresolved
monoline claims pertain to second-lien loans and are currently the
subject of litigation.
During 2013, we 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, including $646 million and
$12.2 billion in GSE claims resolved through settlements with
FHLMC and FNMA and $945 million resolved 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.
Representations and Warranties Liability
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. For additional discussion of the
representations and warranties liability and the corresponding
estimated range of possible loss, see Off-Balance Sheet
Arrangements and Contractual Obligations – Estimated Range of
Possible Loss on page 52.
At December 31, 2013 and 2012, the liability for
representations and warranties was $13.3 billion and $19.0
billion, with the decrease primarily driven by the FNMA Settlement.
For 2013, the representations and warranties provision was $840
million compared to $3.9 billion for 2012. The provision for 2013
was driven by our remaining GSE exposures, including the FHLMC
Settlement and our obligations related to MI rescissions. The
provision for 2012 included $2.5 billion in provision related to the
FNMA Settlement and $500 million for obligations to FNMA related
to MI rescissions.
Our estimated liability at December 31, 2013 for obligations
under representations and warranties is necessarily dependent
on, and limited by, a number of factors, including for private-label
securitizations the implied repurchase experience based on the
BNY Mellon Settlement, as well as certain other assumptions and
judgmental factors. Accordingly, future provisions associated with
obligations under representations and warranties may be
materially impacted if actual experiences are different from
historical experience or our understandings, interpretations or
assumptions. Although we have not recorded any representations
and warranties liability for certain potential private-label
securitization and whole-loan exposures where we have had little
to no claim activity, these exposures are included in the estimated
range of possible loss.
Experience with Government-sponsored Enterprises
As a result of various settlements with the GSEs, we have resolved
substantially all outstanding and potential representations and
warranties repurchase claims on whole loans sold by legacy Bank
of America and Countrywide to FNMA and FHLMC through 2008
and 2009, respectively. After these settlements, our exposure to
representations and warranties liability for loans originated prior
to 2009 and sold to the GSEs is limited to loans with an original
principal balance of $13.7 billion and loans with certain defects
excluded from the settlements that we do not believe will be
material, such as title defects and certain specified violations of
the GSEs’ charters. As of December 31, 2013, of the $13.7 billion,
approximately $10.8 billion in principal has been paid, $941
million in principal has defaulted or was severely delinquent and
the notional amount of unresolved repurchase claims submitted
by the GSEs was $144 million related to these vintages.
Experience with Investors Other than Government-
sponsored Enterprises
In prior years, legacy companies and certain subsidiaries sold
pools of first-lien residential mortgage loans and home equity loans
as private-label securitizations or in the form of whole loans
originated from 2004 through 2008 with an original principal
balance of $965 billion to investors other than GSEs (although
the GSEs are investors in certain private-label securitizations), of
which $552 billion in principal has been paid, $192 billion in
principal has defaulted, $53 billion in principal was severely
delinquent, and $168 billion in principal was current or less than
180 days past due at December 31, 2013.