Bank of America 2014 Annual Report Download - page 220

218 Bank of America 2014
Lynch and a number of related entities as defendants. Prudential
asserts certain MBS Claims pertaining to 54 MBS offerings from
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, punitive damages and other unspecified relief. On April
17, 2014, the court granted in part and denied in part defendants’
motion to dismiss the complaint. Prudential thereafter split its
claims into two separate complaints, filing an amended complaint
in the original action and a complaint in a separate action entitled
Prudential Portfolios 2, et al. v. Bank of America, N.A., et al. Both
cases are pending in the U.S. District Court for the District of New
Jersey. On February 5, 2015, the court granted in part and denied
in part defendants’ motion to dismiss those complaints, granting
plaintiff leave to replead in certain respects.
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 Countrywide
Home Loans, Inc. (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, the 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. 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.
On February 13, 2014, the court granted defendants’ motion to
dismiss the repleaded claim seeking repurchase of all mortgage
loans in the Trust; plaintiff has appealed that order.
On November 13, 2014, the court granted U.S. Bank’s motion
for leave to amend the complaint; defendants have appealed that
order. The amended complaint alleges breach of contract based
upon defendants’ failure to repurchase loans that were the subject
of specific repurchase demands and also alleges breach of
contract based upon defendants’ discovery, during origination and
servicing, of loans with material breaches of representations and
warranties.
U.S. Bank Summonses with Notice
On August 29, 2014, U.S. Bank, solely in its capacity as Trustee
for seven securitization trusts (the Trusts), served seven
summonses with notice commencing potential actions against
First Franklin Financial Corporation, Merrill Lynch Mortgage
Lending, Inc., Merrill Lynch Mortgage Investors, Inc., and Ownit
Mortgage Solutions Inc. in New York Supreme Court, New York
County. The summonses indicate that defendants may be subject
to breach of contract claims alleging that they breached
representations and warranties related to loans securitized in the
Trusts. The summonses allege that defendants failed to
repurchase breaching mortgage loans from the Trusts. The
summonses seek specific performance of defendants’ alleged
obligation to repurchase breaching loans, declaratory judgment,
compensatory, rescissory and other damages, and indemnity. On
February 5, 2015, defendants demanded complaints on three of
the Trusts. Defendants currently have until March 3, 2015 to
demand the complaint with respect to one of the remaining Trusts,
and until July 15, 2015 to demand complaints on the final three
Trusts.
Ocala Investor Litigation
On November 25, 2009, BNP Paribas Mortgage Corporation (BNP)
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 granted in part and denied 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
granted BANA’s motion to dismiss plaintiffs’ claims for failure to
sue, negligence, negligent misrepresentation and equitable relief.
On November 24, 2014, BANA moved for summary judgment
and plaintiffs moved for partial summary judgment.
On February 19, 2015, BANA and BNP reached an agreement
in principle to settle the 2009 actions for an amount not material
to the Corporation’s results of operations, subject to the execution
of a final settlement agreement.
O’Donnell Litigation
On February 24, 2012, Edward O’Donnell filed a sealed qui tam
complaint under the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 (FIRREA) and the False Claims Act against
the Corporation, individually, and as successor to Countrywide,