NOTE 11 – Commitments and Contingencies

     In the normal course of business, the Corporation enters into a number of off-balance sheet commitments. These commitments expose the Corporation to varying degrees of credit and market risk and are subject to the same credit and market risk limitation reviews as those instruments recorded on the Corporation’s Consolidated Balance Sheet. For additional information on commitments and contingencies, see Note 14 — Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2010 Annual Report on Form 10-K.

Credit Extension Commitments

     The Corporation enters into commitments to extend credit such as loan commitments, standby letters of credit (SBLCs) and commercial letters of credit to meet the financing needs of its customers. The table on page 186 shows the notional amount of unfunded legally binding lending commitments net of amounts distributed (e.g., syndicated) to other financial institutions of $20.4 billion and $23.3 billion at June 30, 2011 and December 31, 2010. At June 30, 2011, the carrying amount of these commitments, excluding commitments accounted for under the fair value option, was $925 million, including deferred revenue of $28 million and a reserve for unfunded lending commitments of $897 million. At December 31, 2010, the comparable amounts were $1.2 billion, $29 million and $1.2 billion, respectively. The carrying amount of these commitments is classified in accrued expenses and other liabilities on the Consolidated Balance Sheet.

     The table below also includes the notional amount of commitments of $28.0 billion and $27.3 billion at June 30, 2011 and December 31, 2010 that are accounted for under the fair value option. However, the table below excludes fair value adjustments of $773 million and $866 million on these commitments, which are classified in accrued expenses and other liabilities. For information regarding the Corporation’s loan commitments accounted for under the fair value option, see Note 17 — Fair Value Option.

		June 30, 2011
						Expire after 1				Expire after 3
		Expire in 1				Year through				Years through				Expire after 5
(Dollars in millions)		Year or Less				3 Years				5 Years				Years				Total
Notional amount of credit extension commitments
Loan commitments		$	116,408			$	113,690			$	78,377			$	19,966			$	328,441
Home equity lines of credit			1,523				5,387				19,973				45,260				72,143
Standby letters of credit and financial guarantees (1)			34,382				18,419				6,710				3,220				62,731
Letters of credit (2)			4,350				103				3				166				4,622
Legally binding commitments			156,663				137,599				105,063				68,612				467,937
Credit card lines (3)			488,460				-				-				-				488,460
Total credit extension commitments		$	645,123			$	137,599			$	105,063			$	68,612			$	956,397
		December 31, 2010
Notional amount of credit extension commitments
Loan commitments		$	152,926			$	144,461			$	43,465			$	16,172			$	357,024
Home equity lines of credit			1,722				4,290				18,207				55,886				80,105
Standby letters of credit and financial guarantees (1)			35,275				18,940				4,144				5,897				64,256
Letters of credit (2)			3,698				110				-				874				4,682
Legally binding commitments			193,621				167,801				65,816				78,829				506,067
Credit card lines (3)			497,068				-				-				-				497,068
Total credit extension commitments		$	690,689			$	167,801			$	65,816			$	78,829			$	1,003,135

(1)		The notional amounts of SBLCs and financial guarantees classified as investment-grade and non-investment grade based on the credit quality of the underlying reference name within the instrument were $40.5 billion and $21.0 billion at June 30, 2011 and $41.1 billion and $22.4 billion at December 31, 2010. Amount includes consumer letters of credit of $794 million and other letters of credit of $362 million at June 30, 2011.
(2)		Amount includes $109 million and $849 million of consumer letters of credit and $4.5 billion and $3.8 billion of commercial letters of credit at June 30, 2011 and December 31, 2010, respectively.
(3)		Includes business card unused lines of credit.

     Legally binding commitments to extend credit generally have specified rates and maturities. Certain of these commitments have adverse change clauses that help to protect the Corporation against deterioration in the borrower’s ability to pay.

Other Commitments

Global Principal Investments and Other Equity Investments

     At June 30, 2011 and December 31, 2010, the Corporation had unfunded equity investment commitments of approximately $1.2 billion and $1.5 billion. In light of proposed Basel regulatory capital changes related to unfunded commitments, the Corporation has actively reduced these commitments in a series of transactions involving its private equity fund investments. For more information on these Basel regulatory capital changes, see Note 18 – Regulatory Requirements and Restrictions to the Consolidated Financial Statements of the Corporation’s 2010 Annual Report on Form 10-K. In 2010, the Corporation completed the sale of its exposure to certain private equity funds. For more information on these transactions, see Note 5 – Securities to the Consolidated Financial Statements of the Corporation’s 2010 Annual Report on Form 10-K.

Other Commitments

     At June 30, 2011 and December 31, 2010, the Corporation had commitments to purchase loans (e.g., residential mortgage and commercial real estate) of $3.5 billion and $2.6 billion, which upon settlement will be included in loans or LHFS.

     At June 30, 2011 and December 31, 2010, the Corporation had commitments to enter into forward-dated resale and securities borrowing agreements of $86.1 billion and $39.4 billion. In addition, the Corporation had commitments to enter into forward-dated repurchase and securities lending agreements of $72.9 billion and $33.5 billion. All of these commitments expire within the next 12 months.

     The Corporation is a party to operating leases for certain of its premises and equipment. Commitments under these leases are approximately $1.6 billion, $2.9 billion, $2.4 billion, $1.8 billion and $1.5 billion for the remainder of 2011 through 2015, respectively, and $7.1 billion in the aggregate for all years thereafter.

     The Corporation has entered into agreements with providers of market data, communications, systems consulting and other office-related services. At June 30, 2011 and December 31, 2010, the minimum fee commitments over the remaining terms of these agreements totaled $2.0 billion and $2.1 billion.

Other Guarantees

Bank-owned Life Insurance Book Value Protection

     The Corporation sells products that offer book value protection to insurance carriers who offer group life insurance policies to corporations, primarily banks. The book value protection is provided on portfolios of intermediate investment-grade fixed-income securities and is intended to cover any shortfall in the event that policyholders surrender their policies and market value is below book value. To manage its exposure, the Corporation imposes significant restrictions on surrenders and the manner in which the portfolio is liquidated and the funds are accessed. In addition, investment parameters of the underlying portfolio are restricted. These constraints, combined with structural protections, including a cap on the amount of risk assumed on each policy, are designed to provide adequate buffers and guard against payments even under extreme stress scenarios. These guarantees are recorded as derivatives and carried at fair value in the trading portfolio. At June 30, 2011 and December 31, 2010, the notional amount of these guarantees totaled $15.9 billion and $15.8 billion and the Corporation’s maximum exposure related to these guarantees totaled $5.1 billion and $5.0 billion with estimated maturity dates between 2030 and 2040. As of June 30, 2011, the Corporation has not made a payment under these products. The probability of surrender has increased due to the deteriorating financial health of policyholders, but remains a small percentage of total notional.

Employee Retirement Protection

     The Corporation sells products that offer book value protection primarily to plan sponsors of Employee Retirement Income Security Act of 1974 (ERISA) governed pension plans, such as 401(k) plans and 457 plans. The book value protection is provided on portfolios of intermediate/short-term investment-grade fixed-income securities and is intended to cover any shortfall in the event that plan participants continue to withdraw funds after all securities have been liquidated and there is remaining book value. The Corporation retains the option to exit the contract at any time. If the Corporation exercises its option, the purchaser can require the Corporation to purchase high-quality fixed-income securities, typically government or government-backed agency securities, with the proceeds of the liquidated assets to assure the return of principal. To manage its exposure, the Corporation imposes significant restrictions and constraints on the timing of the withdrawals, the manner in which the portfolio is liquidated and the funds are accessed, and the investment parameters of the underlying portfolio. These constraints, combined with structural protections, are designed to provide adequate buffers and guard against payments even under extreme stress scenarios. These guarantees are recorded as derivatives and carried at fair value in the trading portfolio. At June 30, 2011 and December 31, 2010, the notional amount of these guarantees totaled $31.8 billion and $33.8 billion with estimated maturity dates up to 2014 if the exit option is exercised on all deals. As of June 30, 2011, the Corporation has not made a payment under these products and has assessed the probability of payments under these guarantees as remote.

Merchant Services

     During 2009, the Corporation contributed its merchant processing business to a joint venture in exchange for a 46.5 percent ownership interest in the joint venture. During the three months ended June 30, 2010, the joint venture purchased the interest held by one of the three initial investors bringing the Corporation’s ownership interest up to 49 percent. For additional information on the joint venture agreement, see Note 5 – Securities.

     In accordance with credit and debit card association rules, the Corporation sponsors merchant processing servicers that process credit and debit card transactions on behalf of various merchants. In connection with these services, a liability may arise in the event of a billing dispute between the merchant and a cardholder that is ultimately resolved in the cardholder’s favor and the merchant defaults on its obligation to reimburse the cardholder. A cardholder, through its issuing bank, generally has until the later of up to six months after the date a transaction is processed or the delivery of the product or service to present a chargeback to the merchant processor. The sponsored entities are primarily liable for any losses on covered transactions. However, if the sponsored entities fail to meet their obligation to reimburse the cardholder for disputed transactions, then the Corporation, as the sponsor, could be held liable for the disputed amount. For the three and six months ended June 30, 2011, the sponsored entities processed and settled $109.9 billion and $194.8 billion of sponsored transactions and recorded losses of $3 million and $5 million. For the three and six months ended June 30, 2010, the sponsored entities processed and settled $82.8 billion and $161.9 billion of sponsored transactions and recorded losses of $5 million and $8 million. At June 30, 2011 and December 31, 2010, the Corporation held as collateral $29 million and $25 million of merchant escrow deposits which may be used to offset amounts due from the individual merchants.

     The Corporation believes that the maximum potential exposure is not representative of the actual potential loss exposure. The Corporation believes the maximum potential exposure for chargebacks would not exceed the total amount of merchant transactions processed through Visa, MasterCard and Discover for the last six months, which represents the claim period for the cardholder, plus any outstanding delayed-delivery transactions. As of June 30, 2011 and December 31, 2010, the maximum potential exposure for sponsored transactions totaled approximately $158.6 billion and $139.5 billion. The Corporation does not expect to make material payments in connection with these guarantees.

Other Derivative Contracts

     The Corporation funds selected assets, including securities issued by CDOs and CLOs, through derivative contracts, typically total return swaps, with third parties and SPEs that are not consolidated on the Corporation’s Consolidated Balance Sheet. At June 30, 2011 and December 31, 2010, the total notional amount of these derivative contracts was approximately $5.1 billion and $4.3 billion with commercial banks and $2.1 billion and $1.7 billion with SPEs. The underlying securities are senior securities and substantially all of the Corporation’s exposures are insured. Accordingly, the Corporation’s exposure to loss consists principally of counterparty risk to the insurers. In certain circumstances, generally as a result of ratings downgrades, the Corporation may be required to purchase the underlying assets, which would not result in additional gain or loss to the Corporation as such exposure is already reflected in the fair value of the derivative contracts.

Other Guarantees

     The Corporation sells products that guarantee the return of principal to investors at a preset future date. These guarantees cover a broad range of underlying asset classes and are designed to cover the shortfall between the market value of the underlying portfolio and the principal amount on the preset future date. To manage its exposure, the Corporation requires that these guarantees be backed by structural and investment constraints and certain pre-defined triggers that would require the underlying assets or portfolio to be liquidated and invested in zero-coupon bonds that mature at the preset future date. The Corporation is required to fund any shortfall between the proceeds of the liquidated assets and the purchase price of the zero-coupon bonds at the preset future date. These guarantees are recorded as derivatives and carried at fair value in the trading portfolio. At June 30, 2011 and December 31, 2010, the notional amount of these guarantees totaled $374 million and $666 million. These guarantees have various maturities ranging from two to five years. As of June 30, 2011 and December 31, 2010, the Corporation had not made a payment under these products and has assessed the probability of payments under these guarantees as remote.

     The Corporation has entered into additional guarantee agreements and commitments, including lease-end obligation agreements, partial credit guarantees on certain leases, real estate joint venture guarantees, sold risk participation swaps, divested business commitments and sold put options that require gross settlement. The maximum potential future payment under these agreements was approximately $3.2 billion and $3.4 billion at June 30, 2011 and December 31, 2010. The estimated maturity dates of these obligations extend up to 2033. The Corporation has made no material payments under these guarantees.

     In addition, the Corporation has guaranteed the payment obligations of certain subsidiaries of Merrill Lynch on certain derivative transactions. The aggregate notional amount of such derivative liabilities was approximately $2.4 billion and $2.1 billion at June 30, 2011 and December 31, 2010. In the normal course of business, the Corporation periodically guarantees the obligations of its affiliates in a variety of transactions including ISDA-related transactions and non ISDA-related transactions such as commodities trading, repurchase agreements, prime brokerage agreements and other transactions.

Payment Protection Insurance Claims Matter

     In the U.K., the Corporation sells payment protection insurance (PPI) through its Global Card Services business to credit card customers and has previously sold this insurance to consumer loan customers. PPI covers a consumer’s loan or debt repayment if certain events occur such as loss of job or illness. In response to an elevated level of customer complaints of misleading sales tactics across the industry, heightened media coverage and pressure from consumer advocacy groups, the U.K. Financial Services Authority (FSA) investigated and raised concerns about the way some companies have handled complaints relating to the sale of these insurance policies. In August 2010, the FSA issued a policy statement (the FSA Policy Statement) on the assessment and remediation of PPI claims that is applicable to the Corporation’s U.K. consumer businesses and is intended to address concerns among consumers and regulators regarding the handling of PPI complaints across the industry. The FSA Policy Statement sets standards for the sale of PPI that apply to current and prior sales, and in the event a company does not or did not comply with the standards, it is alleged that the insurance was incorrectly sold, giving the customer rights to remedies. The FSA Policy Statement also requires companies to review their sales practices and to proactively remediate non-complaining customers if evidence of a systematic breach of the newly articulated sales standards is discovered, which could include refunding premiums paid.

     In October 2010, the British Bankers’ Association (BBA), on behalf of its members, including the Corporation, challenged the provisions of the FSA Policy Statement and their retroactive application to sales of PPI to U.K. consumers through a judicial review process against the FSA and the U.K. Financial Ombudsman Service. On April 20, 2011, the U.K. court issued a judgment upholding the FSA Policy Statement as promulgated and dismissing the BBA’s challenge. The BBA will not appeal the decision. Following the conclusion of the judicial review and the subsequent completion of the detailed root cause analysis as required by the FSA Policy Statement, the Corporation re-assessed its reserve for PPI claims resulting in an increase in the reserve of $77 million bringing the total accrued liability as of June 30, 2011 to $769 million.

Litigation and Regulatory Matters

     The following supplements the disclosure in Note 14 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2010 Annual Report on Form 10-K and in Note 11 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 (collectively, the prior commitments and contingencies disclosures).

     In the ordinary course of business, the Corporation and its subsidiaries are routinely defendants in or parties to many pending and threatened legal actions and proceedings, including actions brought on behalf of various classes of claimants. These actions and proceedings are generally based on alleged violations of consumer protection, securities, environmental, banking, employment and other laws. In some of these actions and proceedings, claims for substantial monetary damages are asserted against the Corporation and its subsidiaries.

     In the ordinary course of business, the Corporation and its subsidiaries are also subject to regulatory examinations, information gathering requests, inquiries and investigations. Certain subsidiaries of the Corporation are registered broker/dealers or investment advisors and are subject to regulation by the SEC, the Financial Industry Regulatory Authority (FINRA), the New York Stock Exchange, the FSA and other domestic, international and state securities regulators. In connection with formal and informal inquiries by those agencies, such subsidiaries receive numerous requests, subpoenas and orders for documents, testimony and information in connection with various aspects of their regulated activities.

     In view of the inherent difficulty of predicting the outcome of such litigation and regulatory matters, particularly where the claimants seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, the Corporation generally cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines or penalties related to each pending matter may be.

     In accordance with applicable accounting guidance, the Corporation establishes an accrued liability for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. When a loss contingency is not both probable and estimable, the Corporation does not establish an accrued liability. As a litigation or regulatory matter develops, the Corporation, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. If, at the time of evaluation, the loss contingency related to a litigation or regulatory matter is not both probable and estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and estimable. Once the loss contingency related to a litigation or regulatory matter is deemed to be both probable and estimable, the Corporation will establish an accrued liability with respect to such loss contingency and record a corresponding amount of litigation-related expense. The Corporation continues to monitor the matter for further developments that could affect the amount of the accrued liability that has been previously established. Excluding fees paid to external legal service providers, litigation-related expense was $2.3 billion and $3.2 billion during the three and six months ended June 30, 2011 compared to $102 million and $690 million for the same periods in 2010.

     For a limited number of the matters disclosed in this Note, and in the prior commitments and contingencies disclosure, for which a loss is probable or reasonably possible in future periods, whether in excess of a related accrued liability or where there is no accrued liability, the Corporation is able to estimate a range of possible loss. In determining whether it is possible to provide an estimate of loss or range of possible loss, the Corporation reviews and evaluates its material litigation and regulatory matters on an ongoing basis, in conjunction with any outside counsel handling the matter, in light of potentially relevant factual and legal developments. These may include information learned through the discovery process, rulings on dispositive motions, settlement discussions, and other rulings by courts, arbitrators or others. In cases in which the Corporation possesses sufficient appropriate information to develop an estimate of loss or range of possible loss, that estimate is aggregated and disclosed below. There may be other disclosed matters for which a loss is probable or reasonably possible but such an estimate may not be possible. For those matters where an estimate is possible, management currently estimates the aggregate range of possible loss is $0 to $2.3 billion in excess of the accrued liability (if any) related to those matters. This estimated range of possible loss is based upon currently available information and is subject to significant judgment and a variety of assumptions, and known and unknown uncertainties. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate. Those matters for which an estimate is not possible are not included within this estimated range. Therefore, this estimated range of possible loss represents what the Corporation believes to be an estimate of possible loss only for certain matters meeting these criteria. It does not represent the Corporation’s maximum loss exposure. Information is provided below, or in the prior commitments and contingencies disclosure, regarding the nature of all of these contingencies and, where specified, the amount of the claim associated with these loss contingencies. Based on current knowledge, management does not believe that loss contingencies arising from pending matters, including the matters described herein and in the prior commitments and contingencies disclosure, will have a material adverse effect on the consolidated financial position or liquidity of the Corporation. However, in light of the inherent uncertainties involved in these matters, some of which are beyond the Corporation’s control, and the very large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to the Corporation’s results of operations or cash flows for any particular reporting period.

Checking Account Overdraft Litigation

     On May 24, 2011, the Multi-District Litigation transferee court entered an order preliminarily approving the settlement.

Countrywide Bond Insurance Litigation

MBIA

     On June 30, 2011, the appellate court issued a decision on the parties’ cross-appeals in MBIA Insurance Corporation, Inc. v. Countrywide Home Loans, et al. The appellate court dismissed MBIA Insurance Corporation’s breach of implied covenant of good faith and fair dealing claim, which reversed the trial court ruling on that claim, and otherwise affirmed the trial court’s decisions.

Syncora

     The trial is set to commence during or after the second quarter of 2012.

FGIC

     The trial is set to commence during or after the fourth quarter of 2012.

Fontainebleau Las Vegas Litigation

     On June 9, 2009, Fontainebleau Las Vegas, LLC, then a Chapter 11 debtor-in-possession (FBLV), commenced an adversary proceeding, entitled Fontainebleau Las Vegas, LLC v. Bank of America, N.A., Merrill Lynch Capital Corporation, et al. (FBLV action), against a group of lenders, including BANA and Merrill Lynch Capital Corporation (MLCC). The action was originally filed in the United States Bankruptcy Court, Southern District of Florida but is now before the U.S. District Court for the Southern District of Florida. On April 12, 2010, FBLV’s Chapter 11 case was converted to a Chapter 7 case and a Trustee was appointed. On July 15, 2010, the district court entered an order substituting the Trustee as plaintiff in this action. The complaint alleges, among other things, that defendants breached an agreement to lend their respective committed amounts under an $800 million revolving loan facility, of which BANA and MLCC had each committed $100 million, in connection with the construction of a resort and casino development in Las Vegas. The complaint seeks damages in excess of $3 billion and a “turnover” order under Section 542 of the Bankruptcy Code requiring the lenders to fund their respective commitments. On September 21, 2010, the court entered an order dismissing the breach of contract and turnover claims in order to allow the plaintiff to pursue an immediate appeal of the court’s August 2009 decision denying partial summary judgment of certain of FBLV’s claims. The Trustee filed a notice of appeal on October 18, 2010. That appeal is currently pending before the U.S. Court of Appeals for the Eleventh Circuit.

     On June 9, 2009, a related lawsuit, Avenue CLO Fund Ltd., et al. v. Bank of America, N.A., Merrill Lynch Capital Corporation, et al. (the Avenue action), was filed in the U.S. District Court for the District of Nevada by certain project lenders. On September 21, 2009, another related lawsuit, ACP Master, Ltd., et al. v. Bank of America, N.A., Merrill Lynch Capital Corporation, et al. (the ACP action), was filed in the U.S. District Court for the Southern District of New York by the purported successors-in-interest to certain project lenders. These two actions were subsequently transferred by the Judicial Panel on Multidistrict Litigation to the U.S. District Court for the Southern District of Florida for coordinated pretrial proceedings with the FBLV action. Plaintiffs in the Avenue and ACP actions (the Term Lenders) allege that BANA, MLCC and the other defendants breached their revolving loan facility commitments to FBLV. In addition, they allege that BANA breached its duties as disbursement agent under a separate agreement governing the disbursement of loaned funds to FBLV. The Term Lenders seek unspecified money damages on their claims. On May 28, 2010, the district court granted defendants’ motion to dismiss the revolving loan facility commitment claims, but denied BANA’s motion to dismiss the disbursement agent claims. On January 13, 2011, the district court granted the Term Lenders’ motion for entry of a partial final judgment on their revolving loan facility commitment claims. The Term Lenders filed a notice of appeal with respect to those claims on January 19, 2011.

     On April 19, 2011, the district court dismissed the disbursement agent claims against BANA in the ACP action after the Avenue action plaintiffs represented that they had acquired the claims belonging to the ACP action plaintiffs and would be pursuing those claims in the Avenue action.

Interchange and Related Litigation

     On May 16, 2011, a proceeding parallel to Watson v. Bank of America Corporation, containing substantially the same allegations was commenced in Ontario Superior Court under the caption Bancroft-Snell v. Visa Canada Corp. et. al.

Lehman Brothers Holdings, Inc. Litigation

     On June 4, 2010, defendants filed a motion to dismiss the class action complaint, and on July 27, 2011, the court granted in part and denied in part the motion. Certain of the allegations in the complaint that purported to support the Section 11 claim against the underwriter defendants were dismissed; others were not dismissed relating to alleged misstatements regarding Lehman Brothers Holdings, Inc.’s leverage and financial condition, risk management and risk concentrations.

Lehman Setoff Litigation

     On May 20, 2011, the Bankruptcy Court entered final judgment in the matter. BANA noticed its appeal on May 23, 2011.

MBIA Insurance Corporation CDO Litigation

     On July 11, 2011, the parties reached an agreement to settle the litigation, which did not require any payment by Merrill Lynch.

Merrill Lynch Acquisition-related Matters

Securities Actions

     On July 29, 2011, the court in the securities class actions in In re Bank of America Securities, Derivative and Employment Retirement Income Security Act (ERISA) Litigation granted in part and denied in part the Corporation’s and its co-defendants’ motion to dismiss the second amended complaint. Among other rulings, the court: (i) dismissed plaintiffs’ claim under Section 10(b) of the Securities Exchange Act of 1934 alleging that the Corporation and individual defendants committed securities fraud in connection with the failure to disclose the Corporation’s discussions with government officials in December 2008 regarding the possibility of obtaining government assistance in completing the Merrill Lynch acquisition; (ii) dismissed the claims of certain holders of the Corporation’s preferred shares, purchasers of the Corporation’s bonds, and owners of call options on the ground that such securities holders lacked standing to pursue a claim against the Corporation and the individual defendants; and (iii) sustained plaintiffs’ Section 10(b) claim alleging the Corporation failed to disclose the financial condition and 2008 fourth-quarter losses experienced by Merrill Lynch.

Mortgage-backed Securities Litigation

     The Corporation and its affiliates, Countrywide entities and their affiliates, and Merrill Lynch entities and their affiliates have been named as defendants in several cases relating to their various roles as issuer, originator, seller, depositor, sponsor, underwriter and/or controlling entity in MBS offerings, pursuant to which the MBS investors were entitled to a portion of the cash flow from the underlying pools of mortgages. These cases generally include purported class action suits and actions by individual MBS purchasers. Although the allegations vary by lawsuit, these cases generally allege that the registration statements, prospectuses and prospectus supplements for securities issued by securitization trusts contained material misrepresentations and omissions, in violation of Sections 11, 12 and 15 of the Securities Act of 1933, Sections 10(b) and 20 of the Securities Exchange Act of 1934 and/or state securities laws and other state statutory and common laws.

     These cases generally involve allegations of false and misleading statements regarding: (i) the process by which the properties that served as collateral for the mortgage loans underlying the MBS were appraised; (ii) the percentage of equity that mortgage borrowers had in their homes; (iii) the borrowers’ ability to repay their mortgage loans; and (iv) the underwriting practices by which those mortgage loans were originated (collectively MBS Claims). In addition, several of the cases discussed below assert claims related to the ratings given to the different tranches of MBS by rating agencies. Plaintiffs in these cases generally seek unspecified compensatory damages, unspecified costs and legal fees and, in some instances, seek rescission.

     On May 24, 2011, Countrywide filed with the Judicial Panel on Multi-District Litigation a motion to centralize federal court cases involving Countrywide MBS Claims in the U.S. District Court for the Central District of California, which is pending.

Luther Litigation and Related Actions

     On May 6, 2011, the court held, in Maine State Retirement System vs. Countrywide Financial Corporation, et al. (Maine State), that the plaintiffs only have standing to sue over the specific MBS tranches that they purchased, and that the applicable statute of limitations could be tolled by the filing of the Luther v. Countrywide Financial Corporation, et al. (Luther) action only with respect to the specific tranches of MBS that the Luther plaintiffs purchased. On June 6, 2011, the Maine State plaintiffs filed a third amended complaint that asserts claims in connection with nine MBS tranches and moved for certification of the case as a class action. On June 15, 2011, the court denied the Maine State plaintiffs’ motion to permit immediate interlocutory appeal of the court’s orders on standing, tolling of the statute of limitations, and successor liability.

     On May 18, 2011, in Luther, the California Court of Appeal reversed the Superior Court’s dismissal on jurisdictional grounds. Countrywide filed a petition for further review by the California Supreme Court.

IndyMac Litigation

     On June 21, 2011, the court denied plaintiffs’ motion to amend to add MLPF&S and Countrywide Securities Corporation as defendants.

Merrill Lynch MBS Litigation

     On June 15, 2011, the court granted plaintiffs’ motion for class certification.

Federal Home Loan Bank Litigation

     In Federal Home Loan Bank of Chicago v. Banc of America Funding Corp., et al., plaintiff filed an amended complaint that adds Merrill Lynch Mortgage Investors, BANA, and CFC as defendants and adds additional claims for alleged successor liability against the Corporation. Defendants filed a motion to dismiss the amended complaint on May 27, 2011.

     The Federal Home Loan Bank of Indianapolis filed a complaint against the Corporation, BAS, Banc of America Mortgage Securities LLC, CFC and CWMBS Inc., in the Superior Court of Indiana, Marion County, entitled Federal Home Loan Bank of Indianapolis v. Banc of America Mortgage Securities, Inc., et al. Plaintiffs allege that they purchased MBS issued by CFC and BAS-related entities and MBS underwritten by BAS in six public offerings between 2005 and 2007.

     On July 29, 2011, the court denied defendants’ motions to dismiss in the Federal Home Loan Bank of San Francisco v. Credit Suisse Securities (USA) LLC, et al., and Federal Home Loan Bank of San Francisco v. Deutsche Bank Securities Inc., et al. actions.

     On June 23, 2011 and July 18, 2011, the court denied defendants’ motions to dismiss in the Federal Home Loan Bank of Seattle v. UBS Securities LLC, et al.; Federal Home Loan Bank of Seattle v. Countrywide Securities Corp., et al.; Federal Home Loan Bank of Seattle v. Banc of America Securities LLC, et al. and Federal Home Loan Bank of Seattle v. Merrill Lynch, Pierce, Fenner & Smith, Inc., et al. actions.

     The Federal Home Loan Bank of Indianapolis filed a complaint against the Corporation, BAS, Banc of America Mortgage Securities LLC, CFC and CWMBS Inc., in the Superior Court of Indiana, Marion County, entitled Federal Home Loan Bank of Indianapolis v. Banc of America Mortgage Securities, Inc., et al.

Allstate Litigation

     On June 14, 2011, the court granted CFC’s motion and transferred the case to the U.S. District Court for the Central District of California, where it has been assigned to the same judge before whom the Maine State action is pending.

Dexia Litigation

     Dexia Holdings, Inc. and others filed an action on January 24, 2011 against CFC, the Corporation and several of their affiliates, among others, in the New York Supreme Court, entitled Dexia Holdings, Inc., et al., v. Countrywide Financial Corporation, et al. Plaintiffs allege that they purchased MBS issued by CFC-related entities in 142 public offerings and six private placements between April 2004 and August 2007. Defendants filed a motion to remove and transfer the case to the U.S. District Court for the Central District of California and a motion to dismiss.

Western & Southern Litigation

     The Western and Southern Life Insurance Company and others filed an action on April 27, 2011 against CFC, the Corporation, several of their subsidiaries and several individuals in the U.S. District Court for the Southern District of Ohio, entitled The Western and Southern Life Insurance Company, et al., v. Countrywide Financial Corporation, et al. Plaintiffs allege that they purchased MBS issued by CFC-related entities in 32 public offerings between March 2005 and July 2007.

Regulatory Investigations

     The Corporation has received a number of subpoenas and other requests for information from regulators and governmental authorities regarding MBS and other mortgage-related matters, including inquiries and investigations related to a number of transactions involving the Corporation’s underwriting and issuance of MBS and its participation in certain CDO offerings. These inquiries and investigations include, among others: an investigation by the SEC related to Merrill Lynch’s risk control, valuation, structuring, marketing and purchase of CDOs. The Corporation has provided documents and testimony and continues to cooperate fully with these inquiries and investigations.

Mortgage Servicing Investigations and Litigation

     On April 13, 2011, the Corporation entered into a consent order with the Federal Reserve and BANA entered into a consent order with the OCC to address the regulators’ concerns about residential mortgage servicing practices and foreclosure processes. Also on this date, the other 13 largest mortgage servicers separately entered into consent orders with their respective federal bank regulators related to residential mortgage servicing practices and foreclosure processes. The orders resulted from an interagency horizontal review conducted by federal bank regulators of major residential mortgage servicers. While federal bank regulators found that loans foreclosed upon had been generally considered for other alternatives (such as loan modifications) and were seriously delinquent, and that servicers could support their standing to foreclose, several areas for process improvement requiring timely and comprehensive remediation across the industry were also identified. The Corporation identified most of these areas for process improvement after its own review in late 2010 and continues to make significant progress in these areas. The federal bank regulator consent orders with the mortgage servicers do not assess civil monetary penalties. However, the consent orders do not preclude the assertion of civil monetary penalties and a federal bank regulator has stated publicly that it believes monetary penalties are appropriate.

     The consent order with the OCC requires servicers to make several enhancements to their servicing operations, including implementation of a single point of contact model for borrowers throughout the loss mitigation and foreclosure processes; adoption of measures designed to ensure that foreclosure activity is halted once a borrower has been approved for a modification unless the borrower fails to make payments under the modified loan; and implementation of enhanced controls over third-party vendors that provide default servicing support services. In addition, the consent order required that servicers retain an independent consultant, approved by the OCC, in order to conduct a review of all foreclosure actions pending, or foreclosure sales that occurred between January 1, 2009 and December 31, 2010 and submit a plan to the OCC to remediate all financial injury to borrowers caused by any deficiencies identified through the review. The OCC accepted the independent consultant that the Corporation retained to conduct the foreclosure review. Additionally, the Corporation has submitted an action plan to the OCC which will undergo a period of review by the OCC. The OCC may require changes to the action plan, and may consider the ongoing negotiations with the U.S. Department of Justice (DOJ) and other federal and state authorities regarding foreclosure and servicing practices discussed below in its review of the plan.

     In addition, law enforcement authorities in all 50 states and the DOJ and other federal agencies continue to investigate alleged irregularities in the foreclosure practices of residential mortgage servicers, including the Corporation. Authorities have publicly stated that the scope of the investigations extends beyond foreclosure documentation practices to mortgage loan modification and loss mitigation practices, including compliance with the U.S. Department of Housing and Urban Development requirements related to FHA-insured loans. The Corporation continues to cooperate with these investigations and is dedicating significant resources to address these issues. The Corporation and the other largest mortgage servicers continue to engage in ongoing negotiations regarding these matters with law enforcement authorities and federal agencies. The negotiations continue to focus on the amount of any settlement payment and settlement terms, including principal forgiveness, servicing standards, enforcement mechanisms and releases. Although the Corporation cannot be certain as to the ultimate outcome that may result from these negotiations or the timing of such outcome, the parties continue to make progress toward achieving a resolution of these matters.

     The Corporation continues to be subject to additional borrower and non-borrower litigation and governmental and regulatory scrutiny related to the Corporation’s past and current foreclosure activities. This scrutiny may extend beyond its pending foreclosure matters to issues arising out of alleged irregularities with respect to previously completed foreclosure activities.

     The current environment of heightened regulatory scrutiny has the potential to subject the Corporation to inquiries or investigations that could significantly adversely affect its reputation. Such investigations by state and federal authorities, as well as any other governmental or regulatory scrutiny of the Corporation’s foreclosure processes, could result in material fines, penalties, equitable remedies, additional default servicing requirements and process changes, or other enforcement actions, and could result in significant legal costs in responding to governmental investigations and additional litigation.

Ocala Litigation

     On April 4, 2011, BANA filed a first amended complaint in the October 1, 2010 action against the Federal Deposit Insurance Corporation to include, among other things, certain additional facts disclosed during the course of federal criminal proceedings brought against the management of Taylor Bean & Whitaker Mortgage Corporation and Colonial Bank.

     On June 22, 2011, BANA filed third-party complaints in BNP Paribas Mortgage Corporation v. Bank of America, N.A. and Deutsche Bank AG v. Bank of America, N.A. seeking contribution from affiliates of the plaintiffs which were the note dealers and placement agents for the Ocala notes. BANA alleges that, if plaintiffs suffered any losses as a result of the nonpayment of the Ocala notes, these losses were due in whole or in part to actions by the third-party defendants.

Parmalat

     On May 27, 2011, the U.S. Court of Appeals for the Second Circuit upheld the district court’s dismissal of the Food Holdings Ltd., et al. v. Bank of America Corp, et al. action. On June 9, 2011, plaintiffs filed a petition for rehearing, which was denied on July 19, 2011.