Bank of America 2015 Annual Report Download - page 188

186 Bank of America 2015
The table below presents unresolved repurchase claims at
December 31, 2015 and 2014. The unresolved repurchase claims
include only claims where the Corporation believes that the
counterparty has the contractual right to submit claims. The
unresolved repurchase claims predominantly relate to subprime
and pay option first-lien loans and home equity loans. 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, net of
duplicate claims
December 31
(Dollars in millions) 2015 2014 (1)
By counterparty
Private-label securitization trustees, whole-loan
investors, including third-party securitization
sponsors and other (2, 3) $ 16,748 $ 21,276
Monolines (4) 1,599 1,511
GSEs 17 59
Total unresolved repurchase claims by counterparty,
net of duplicate claims $ 18,364 $ 22,846
(1) The December 31, 2014 amounts have been updated to reflect additional claims submitted in
the fourth quarter of 2014 from a single monoline, currently pursuing litigation, and addressed
by the Corporation in 2015 pursuant to an existing litigation schedule. For more information on
bond insurance litigation, see Note 12 – Commitments and Contingencies.
(2) Includes $11.9 billion and $13.8 billion of claims based on individual file reviews and $4.8
billion and $7.5 billion of claims submitted without individual file reviews at December 31, 2015
and 2014.
(3) The total notional amount of unresolved repurchase claims does not include repurchase claims
related to the trusts covered by the BNY Mellon Settlement.
(4) At December 31, 2015, substantially all of the unresolved monoline claims are currently the
subject of litigation with a single monoline insurer and predominately pertain to second-lien
loans.
During 2015, the Corporation received $3.7 billion in new
repurchase claims including $2.9 billion of claims submitted
without individual loan file reviews. During 2015, $8.1 billion in
claims were resolved, including $7.4 billion which are deemed
resolved as a result of the New York Court of Appeals decision in
Ace Securities Corp. v. DB Structure Products, Inc. (ACE). Of the
remaining unresolved monoline claims, substantially all of the
claims pertain to second-lien loans and are currently the subject
of litigation with a single monoline insurer. There may be additional
claims or file requests in the future.
In addition to the unresolved repurchase claims in the
Unresolved Repurchase Claims by Counterparty, net of duplicate
claims table, the Corporation has received notifications from
sponsors of third-party securitizations with whom the Corporation
engaged in whole-loan transactions indicating that the Corporation
may have indemnity obligations with respect to loans for which the
Corporation has not received a repurchase request. These
outstanding notifications totaled $1.4 billion and $2.0 billion at
December 31, 2015 and 2014.
The Corporation also from time to time receives
correspondence purporting to raise representations and
warranties breach issues from entities that do not have contractual
standing or ability to bring such claims. The Corporation believes
such communications to be procedurally and/or substantively
invalid, and generally does not respond.
The presence of repurchase claims on a given trust, receipt of
notices of indemnification obligations and receipt of other
communications, as discussed above, are all factors that inform
the Corporation’s liability for representations and warranties and
the corresponding estimated range of possible loss.
Government-sponsored Enterprises Experience
As a result of various bulk settlements with the GSEs, the
Corporation has 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 June 30, 2012 and December 31, 2009,
respectively. As of December 31, 2015, the notional amount of
unresolved repurchase claims submitted by the GSEs was $14
million for loans originated prior to 2009.
Private-label Securitizations and Whole-loan Sales
Experience
Prior to 2009, 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. In
connection with these transactions, the Corporation or certain of
its subsidiaries or legacy companies made various
representations and warranties. When the Corporation provided
representations and warranties in connection with the sale of
whole loans, the whole-loan investors may retain the right to make
repurchase claims even when the loans were aggregated with other
collateral into private-label securitizations sponsored by the whole-
loan investors. In other third-party securitizations, the whole-loan
investors’ rights to enforce the representations and warranties
were transferred to the securitization trustees. Private-label
securitization investors generally do not have the contractual right
to demand repurchase of loans directly or the right to access loan
files directly.
In private-label securitizations, the applicable contracts provide
that investors meet certain presentation thresholds to issue a
binding direction to a trustee to assert repurchase claims.
However, in certain circumstances, the Corporation believes that
trustees have presented repurchase claims without requiring
investors to meet contractual voting rights thresholds. New private-
label claims are primarily related to repurchase requests received
from trustees for private-label securitization transactions not
included in the BNY Mellon Settlement.
On June 11, 2015, the New York Court of Appeals, New York’s
highest appellate court, issued its opinion in the ACE case, holding
that, under New York law the six-year statute of limitations starts
to run at the time the representations and warranties are made,
not the date when the repurchase demand was denied. In addition,
the Court of Appeals held that compliance with the contractual
notice and cure period was a pre-condition to filing suit, and claims
that did not comply with such contractual requirements prior to
the expiration of the statute of limitations period were invalid. While
no entity affiliated with the Corporation was a party to this litigation,
the vast majority of the private-label RMBS trusts into which
entities affiliated with the Corporation sold loans and made
representations and warranties are governed by New York law, and
the ACE decision should therefore apply to representations and
warranties claims and litigation brought on those RMBS trusts. A
significant number of representations and warranties claims and
lawsuits brought against the Corporation have involved claims
where the statute of limitations has expired under the ACE decision
and are therefore time-barred. The Corporation treats time-barred
claims as resolved and no longer outstanding; however, while post-
ACE case law is in early stages, investors or trustees have sought
to distinguish certain aspects of the ACE decision or to assert
other claims against other RMBS counterparties seeking to avoid
or circumvent the impact of the ACE decision. For example,