Bank of America 2009 Annual Report Download - page 122

Glossary
Alt-A Mortgage – Alternative-A mortgage, a type of U.S. mortgage that, for
various reasons, is considered riskier than A-paper, or “prime”, and less
risky than “subprime,” the riskiest category. Alt-A interest rates, which are
determined by credit risk, therefore tend to be between those of prime
and subprime home loans. Typically, Alt-A mortgages are characterized by
borrowers with less than full documentation, lower credit scores and
higher LTVs.
Asset-Backed Commercial Paper Money Market Fund Liquidity Facility
(AMLF) – A lending program created by the Federal Reserve on Sep-
tember 19, 2008 that provides nonrecourse loans to U.S. financial
institutions for the purchase of U.S. dollar-denominated high-quality
asset-backed commercial paper from money market mutual funds under
certain conditions. This program is intended to assist money market
funds that hold such paper in meeting demands for redemptions by
investors and to foster liquidity in the asset-backed commercial paper
market and money markets more generally. Financial institutions gen-
erally bear no credit risk associated with commercial paper purchased
under the AMLF.
Assets in Custody – Consist largely of custodial and non-discretionary
trust assets excluding brokerage assets administered for customers.
Trust assets encompass a broad range of asset types including real
estate, private company ownership interest, personal property and
investments.
Assets Under Management (AUM) – The total market value of assets
under the investment advisory and discretion of GWIM which generate
asset management fees based on a percentage of the assets’ market
values. AUM reflect assets that are generally managed for institutional,
high net-worth and retail clients and are distributed through various
investment products including mutual funds, other commingled vehicles
and separate accounts.
At-the-market Offering – A form of equity issuance where an exchange-
listed company incrementally sells newly issued shares into the market
through a designated broker/dealer at prevailing market prices, rather
than via a traditional underwritten offering of a fixed number of shares at
a fixed price all at once.
Bridge Financing – A loan or security that is expected to be replaced by
permanent financing (debt or equity securities, loan syndication or asset
sales) prior to the maturity date of the loan. Bridge loans may include an
unfunded commitment, as well as funded amounts, and are generally
expected to be retired in one year or less.
CDO-squared – A type of CDO where the underlying collateral includes
tranches of other CDOs.
Client Brokerage Assets – Include client assets which are held in broker-
age accounts. This includes non-discretionary brokerage and fee-based
assets which generate brokerage income and asset management fee
revenue.
Client Deposits – Includes GWIM client deposit accounts representing
both consumer and commercial demand, regular savings, time, money
market, sweep and foreign accounts.
Committed Credit Exposure – Includes any funded portion of a facility
plus the unfunded portion of a facility on which the lender is legally bound
to advance funds during a specified period under prescribed conditions.
Core Net Interest Income –Managed Basis – Net interest income on a
fully taxable-equivalent basis excluding the impact of market-based activ-
ities and certain securitizations.
Credit Default Swap (CDS) – A derivative contract that provides pro-
tection against the deterioration of credit quality and allows one party to
receive payment in the event of default by a third party under a borrowing
arrangement.
Credit Card Accountability Responsibility and Disclosure Act of 2009
(CARD Act) – Legislation signed into law on May 22, 2009 to provide
changes to credit card industry practices including significantly restricting
credit card issuers’ ability to change interest rates and assess fees to
reflect individual consumer risk, change the way payments are applied
and requiring changes to consumer credit card disclosures. The majority
of the provisions became effective in February 2010.
Derivative – A contract or agreement whose value is derived from
changes in an underlying index such as interest rates, foreign exchange
rates or prices of securities. Derivatives utilized by the Corporation
include swaps, financial futures and forward settlement contracts, and
option contracts.
Emergency Economic Stabilization Act of 2008 (EESA) – Legislation
signed into law on October 3, 2008 authorizing the U.S. Secretary of the
Treasury to, among other things, establish the Troubled Asset Relief
Program.
Excess Servicing Income – For certain assets that have been securitized,
interest income, fee revenue and recoveries in excess of interest paid to
the investors, gross credit losses and other trust expenses related to the
securitized receivables are all classified as excess servicing income,
which is a component of card income. Excess servicing income also
includes the changes in fair value of the Corporation’s card related
retained interests.
Financial Stability Plan – A plan announced on February 10, 2009 by the
U.S. Treasury pursuant to the EESA which outlines a series of initiatives
including the Capital Assistance Program (CAP); the creation of a new
Public-Private Investment Program (PPIP); the expansion of the Term
Asset-Backed Securities Loan Facility (TALF); the extension of the FDIC’s
Temporary Liquidity Guarantee Program (TLGP) to October 31, 2009; the
Small Business and Community Lending Initiative; a broad program to
stabilize the housing market by encouraging lower mortgage rates and
making it easier for homeowners to refinance and avoid foreclosure; and
a new framework of governance and oversight related to the use of funds
of the Financial Stability Plan.
Interest-only Strip – A residual interest in a securitization trust represent-
ing the right to receive future net cash flows from securitized assets after
payments to third party investors and net credit losses. These arise when
assets are transferred to a SPE as part of an asset securitization trans-
action qualifying for sale treatment under GAAP.
Interest Rate Lock Commitment (IRLC) – Commitment with a loan appli-
cant in which the loan terms, including interest rate and price, are guaran-
teed for a designated period of time subject to credit approval.
Loan-to-value (LTV) – A commonly used credit quality metric that is
reported in terms of ending and average LTV. Ending LTV is calculated as
the outstanding carrying value of the loan at the end of the period divided
by the estimated value of the property securing the loan. Estimated prop-
erty values are primarily determined by utilizing the Case-Schiller Home
Index, a widely used index based on data from repeat sales of single
family homes. Case-Schiller indices are updated quarterly and are
reported on a three-month or one-quarter lag. An additional metric related
to LTV is combined loan-to-value (CLTV) which is similar to the LTV met-
ric, yet combines the outstanding balance on the residential mortgage
loan and the outstanding carrying value on the home equity loan or avail-
able line of credit, both of which are secured by the same property, div-
ided by the estimated value of the property. A LTV of 100 percent reflects
a loan that is currently secured by a property valued at an amount exactly
equal to the carrying value or available line of the loan. Under certain
circumstances, estimated values can also be determined by utilizing an
automated valuation method (AVM) or Mortgage Risk Assessment Corpo-
ration (MRAC) index. An AVM is a tool that estimates the value of a prop-
120 Bank of America 2009