Bank of America 2014 Annual Report Download - page 200

198 Bank of America 2014
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 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. Certain objectors to the settlement filed cross-
appeals appealing the court’s approval of the settlement, some
of whom subsequently withdrew their objections. All appeals were
fully briefed by September 22, 2014, and oral argument was held
on October 23, 2014. The court’s January 31, 2014 decision, order
and judgment remain subject to these appeals and it is not
possible at this time to predict when the court approval process
will be completed.
Although the Corporation is not a party to the proceeding,
certain of its 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 the Corporation and
Countrywide will not withdraw from the settlement.
If final court approval is not obtained by December 31, 2015,
the Corporation and Countrywide may withdraw from the BNY
Mellon Settlement, if the Trustee consents. The BNY Mellon
Settlement also provides that if Covered Trusts holding loans with
an unpaid principal balance exceeding a specified amount are
excluded from the final BNY Mellon Settlement, based on investor
objections or otherwise, the Corporation and Countrywide have the
option to withdraw from the BNY Mellon Settlement pursuant to
the terms of the BNY Mellon Settlement agreement. If final court
approval is not obtained or if the Corporation and Countrywide
withdraw from the BNY Mellon Settlement in accordance with its
terms, the Corporation’s future representations and warranties
losses could be substantially different from existing accruals and
the estimated range of possible loss over existing accruals
described under Private-label Securitizations and Whole-loan Sales
Experience in this Note.
Unresolved Repurchase Claims
Unresolved representations and warranties 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. Claims received
from a counterparty remain outstanding until the underlying loan
is repurchased, the claim is rescinded by the counterparty or the
representations and warranties claims with respect to the
applicable trust are settled, and fully and finally released. When
a claim is denied and the Corporation does not receive a response
from the counterparty, the claim remains in the unresolved
repurchase claims balance until resolution. Certain of the claims
the Corporation receives are duplicate claims which represent
more than one claim outstanding related to a particular loan,
typically as the result of bulk claims submitted without individual
file reviews.
The table below presents unresolved repurchase claims at
December 31, 2014 and 2013. The unresolved repurchase claims
include only claims where the Corporation believes that the
counterparty has the contractual right to submit claims. For
additional information, see Private-label Securitizations and
Whole-loan Sales Experience in this Note and Note 12 –
Commitments and Contingencies.
Unresolved Repurchase Claims by Counterparty and
Product Type
December 31
(Dollars in millions) 2014 2013
By counterparty
Private-label securitization trustees, whole-loan
investors, including third-party securitization sponsors
and other (1, 2) $ 24,489 $ 17,953
Monolines (3) 1,087 1,532
GSEs 59 170
Total gross claims 25,635 19,655
Duplicate claims (4) (3,213) (961)
Total unresolved repurchase claims by counterparty,
net of duplicate claims (2) $ 22,422 $ 18,694
By product type
Prime loans $ 587 $ 623
Alt-A 2,397 2,259
Home equity 2,221 1,905
Pay option 6,294 5,780
Subprime 13,928 8,928
Other 208 160
Total 25,635 19,655
Duplicate claims (4) (3,213) (961)
Total unresolved repurchase claims by product type,
net of duplicate claims (2) $ 22,422 $ 18,694
(1) The total notional amount of unresolved repurchase claims does not include repurchase claims
related to the trusts covered by the BNY Mellon Settlement.
(2) Includes $14.1 billion and $13.8 billion of claims based on individual file reviews and $10.4
billion and $4.1 billion of claims submitted without individual file reviews at December 31, 2014
and 2013.
(3) At December 31, 2014, substantially all of the unresolved monoline claims pertain to second-
lien loans and are currently the subject of litigation with a single monoline insurer.
(4) Represents more than one claim outstanding related to a particular loan, typically as the result
of bulk claims submitted without individual file reviews. The December 31, 2014 amount
includes approximately $2.9 billion of duplicate claims related to private-label investors
submitted without individual loan file reviews.
During 2014, the Corporation received $7.6 billion in new
repurchase claims, including $6.3 billion of claims submitted
without individual loan file reviews and $730 million of claims
based on individual loan file reviews submitted by private-label
securitization trustees and a financial guarantee provider, $347
million submitted by the GSEs for both Countrywide and legacy
Bank of America originations not covered by the bulk settlements
with the GSEs, and $265 million submitted by whole-loan investors.
During 2014, $2.0 billion in claims were resolved. Of the claims
resolved, $856 million were resolved through settlement, $535
million were resolved through rescissions and $594 million were
resolved through mortgage repurchases and make-whole
payments to GSEs, private-label securitization trusts and whole-
loan investors.
The continued increase in the notional amount of unresolved
repurchase claims during 2014 is primarily due to: (1) continued
submission of claims by private-label securitization trustees, (2)
the level of detail, support and analysis accompanying such claims,
which impacts overall claim quality and, therefore, claims