Bank of America 2015 Annual Report Download - page 204

202 Bank of America 2015
Corporation, NB Holdings Corporation and certain other
defendants. Those class action lawsuits concerned a total of 429
MBS offerings involving over $350 billion in securities issued by
subsidiaries of Countrywide between 2005 and 2007. The actions,
entitled Luther v. Countrywide Financial Corporation, et al., Maine
State Retirement System v. Countrywide Financial Corporation, et
al., Western Conference of Teamsters Pension Trust Fund v.
Countrywide Financial Corporation, et al., and Putnam Bank v.
Countrywide Financial Corporation, et al., were all assigned to the
Countrywide RMBS MDL court. On December 6, 2013, the court
granted final approval to a settlement of these actions in the
amount of $500 million. Beginning on January 14, 2014, a number
of class members appealed to the U.S. Court of Appeals for the
Ninth Circuit. Oral argument is expected to be held in the second
quarter of 2016.
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, 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 appealed that order. On November 13,
2014, the court granted U.S. Bank’s motion for leave to amend
the complaint; defendants 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.
On September 16, 2015, defendants (i) withdrew the appeal
that had been noticed, but not briefed, regarding the court’s
November 13, 2014 order that had granted U.S. Bank’s motion
for leave to amend, and (ii) moved, on the ground of failure to
perfect, for dismissal of U.S. Bank’s appeal from the court’s
February 13, 2014 order that had dismissed a claim seeking
repurchase of all mortgage loans and sought clarification of a prior
dismissal order. On September 30, 2015, U.S. Bank advised the
court that it did not oppose dismissal of its appeal from the
February 13, 2014 order. On December 15, 2015, defendants’
motion to dismiss U.S. Bank’s appeal was granted.
U.S. Bank Summonses with Notice
On August 29, 2014 and September 2, 2014, U.S. Bank National
Association (U.S. Bank), solely in its capacity as Trustee for seven
securitization trusts (the Trusts), served seven summonses with
notice commencing actions against First Franklin Financial
Corporation, Merrill Lynch Mortgage Lending, Inc., Merrill Lynch
Mortgage Investors, Inc. (MLMI), and Ownit Mortgage Solutions
Inc. in New York Supreme Court. The summonses advance breach
of contract claims alleging that defendants 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, and seek
specific performance of defendants’ alleged obligation to
repurchase breaching loans, declaratory judgment, compensatory,
rescissory and other damages, and indemnity.
U.S. Bank has served complaints on four of the seven Trusts.
On December 7, 2015, the court granted in part and denied in
part defendants’ motion to dismiss the complaints. The court
dismissed claims for breach of representations and warranties
against MLMI, dismissed U.S. Bank’s claims for indemnity and
attorneys’ fees, and deferred a ruling regarding defendants’
alleged failure to provide notice of alleged representation and
warranty breaches, but upheld the complaints in all other respects.
Defendants have until June 8, 2016 to demand complaints relating
to the remaining three Trusts.
O’Donnell Litigation
On February 24, 2012, Edward O’Donnell filed a sealed qui tam
complaint under the False Claims Act against the Corporation,
individually, and as successor to Countrywide, CHL and a
Countrywide business division known as Full Spectrum Lending.
On October 24, 2012, the Department of Justice filed a complaint-
in-intervention to join the matter, adding a claim under the Financial
Institutions Reform, Recovery and Enforcement Act of 1989
(FIRREA) and adding BANA as a defendant. The action is entitled
United States of America, ex rel, Edward O’Donnell, appearing Qui
Tam v. Bank of America Corp., et al., and was filed in the U.S. District
Court for the Southern District of New York. The complaint-in-
intervention asserted certain fraud claims in connection with the
sale of loans to FNMA and FHLMC by Full Spectrum Lending and
by the Corporation and BANA. On January 11, 2013, the
government filed an amended complaint which added Countrywide
Bank, FSB (CFSB) and a former officer of the Corporation as
defendants. The court dismissed False Claims Act counts on May
8, 2013. On September 6, 2013, the government filed a second
amended complaint alleging claims under FIRREA concerning
allegedly fraudulent loan sales to the GSEs between August 2007
and May 2008. On September 24, 2013, the government
dismissed the Corporation as a defendant. Following a trial, on
October 23, 2013, a verdict of liability was returned against CHL,
CFSB, BANA and the former officer. On July 30, 2014, the court
imposed a civil penalty of $1.3 billion on BANA. On February 3,
2015, the court denied the Corporation’s motions for judgment as
a matter of law, or in the alternative, a new trial.