Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

v2.4.0.6
Commitments and Contingencies
 6 Months Ended
Jun. 30, 2012
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Disclosure
NOTE 10 – 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 2011 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 and commercial letters of credit to meet the financing needs of its customers. The Credit Extension Commitments table includes the notional amount of unfunded legally binding lending commitments net of amounts distributed (e.g., syndicated) to other financial institutions of $24.4 billion and $27.1 billion at June 30, 2012 and December 31, 2011. At June 30, 2012, the carrying amount of these commitments, excluding commitments accounted for under the fair value option, was $599 million, including deferred revenue of $25 million and a reserve for unfunded lending commitments of $574 million. At December 31, 2011, the comparable amounts were $741 million, $27 million and $714 million, respectively. The carrying amount of these commitments is classified in accrued expenses and other liabilities on the Corporation's Consolidated Balance Sheet. The table below also includes the notional amount of commitments of $21.8 billion and $25.7 billion at June 30, 2012 and December 31, 2011 that are accounted for under the fair value option. However, the table below excludes fair value adjustments of $948 million and $1.2 billion 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 16 – Fair Value Option.

Credit Extension Commitments
 
 
 
June 30, 2012
(Dollars in millions)
Expire in
One Year
or Less
 
Expire After
One Year Through
Three Years
 
Expire After Three Years Through
Five Years
 
Expire After Five Years
 
Total
Notional amount of credit extension commitments
 
 
 
 
 
 
 
 
 
Loan commitments
$
98,255

 
$
78,145

 
$
124,964

 
$
13,707

 
$
315,071

Home equity lines of credit
1,965

 
10,660

 
22,349

 
29,967

 
64,941

Standby letters of credit and financial guarantees (1)
27,602

 
16,900

 
5,577

 
2,291

 
52,370

Letters of credit
2,333

 
73

 
23

 
1,177

 
3,606

Legally binding commitments
130,155

 
105,778

 
152,913

 
47,142

 
435,988

Credit card lines (2)
431,728

 
—

 
—

 
—

 
431,728

Total credit extension commitments
$
561,883

 
$
105,778

 
$
152,913

 
$
47,142

 
$
867,716

 
 
 
 
 
 
 
 
 
 
 
December 31, 2011
Notional amount of credit extension commitments
 
 
 
 
 
 
 
 
 
Loan commitments
$
96,291

 
$
85,413

 
$
120,770

 
$
15,009

 
$
317,483

Home equity lines of credit
1,679

 
7,765

 
20,963

 
37,066

 
67,473

Standby letters of credit and financial guarantees (1)
26,965

 
18,932

 
6,433

 
5,505

 
57,835

Letters of credit
2,828

 
27

 
5

 
383

 
3,243

Legally binding commitments
127,763

 
112,137

 
148,171

 
57,963

 
446,034

Credit card lines (2)
449,097

 
—

 
—

 
—

 
449,097

Total credit extension commitments
$
576,860

 
$
112,137

 
$
148,171

 
$
57,963

 
$
895,131

(1) 
The notional amounts of standby letters of credit 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 $37.4 billion and $14.3 billion at June 30, 2012, and $39.2 billion and $17.8 billion at December 31, 2011. Amounts include consumer standby letters of credit of $635 million and $859 million at June 30, 2012 and December 31, 2011.
(2) 
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, 2012 and December 31, 2011, the Corporation had unfunded equity investment commitments of $369 million and $772 million. In light of proposed Basel regulatory capital changes related to unfunded commitments, over the past two years, the Corporation has actively reduced these commitments in a series of sale transactions involving its private equity investments.

Other Commitments

At June 30, 2012 and December 31, 2011, the Corporation had commitments to purchase loans (e.g., residential mortgage and commercial real estate) of $2.2 billion and $2.5 billion, which upon settlement will be included in loans or LHFS.

At June 30, 2012 and December 31, 2011, the Corporation had commitments to enter into forward-dated resale and securities borrowing agreements of $95.7 billion and $67.0 billion. In addition, the Corporation had commitments to enter into forward-dated repurchase and securities lending agreements of $39.9 billion and $42.0 billion. All of these commitments expire within the next 12 months. In addition, at June 30, 2012, the Corporation had a commitment to enter into a contingent forward-dated resale agreement for U.S. agency MBS of $2.1 billion with a clearing organization. The facility does not have an expiration date.

The Corporation is a party to operating leases for certain of its premises and equipment. Commitments under these leases are approximately $1.5 billion, $2.8 billion, $2.3 billion, $1.8 billion and $1.5 billion for the remainder of 2012 and the years through 2016, respectively, and $7.3 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, 2012 and December 31, 2011, the minimum fee commitments over the remaining terms of these agreements totaled $1.7 billion and $1.9 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 both June 30, 2012 and December 31, 2011, the notional amount of these guarantees totaled $15.8 billion and the Corporation’s maximum exposure related to these guarantees totaled $5.1 billion with estimated maturity dates between 2030 and 2040. As of June 30, 2012, the Corporation had not made a payment under these products. The possibility of surrender or other payment associated with these guarantees exists. The Corporation is in discussions with certain counterparties regarding potential early termination. The net fair value of the fee receivable associated with these guarantees was $39 million and $48 million at June 30, 2012 and December 31, 2011 and reflects the probability of surrender as well as the multiple structural protection features in the contracts.

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, 2012 and December 31, 2011, the notional amount of these guarantees totaled $22.9 billion and $28.8 billion with estimated maturity dates up to 2015 if the exit option is exercised on all deals. As of June 30, 2012, the Corporation had not made a payment under these products.

Merchant Services

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. If the merchant defaults on its obligation to reimburse the cardholder, the cardholder, through its issuing bank, generally has until six months after the date of the transaction to present a chargeback to the merchant processor, which is primarily liable for any losses on covered transactions. However, if the merchant processor fails to meet its 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, 2012 , the sponsored entities processed and settled $155.6 billion and $288.8 billion of transactions and recorded losses of $2 million and $4 million. For the three and six months ended June 30, 2011, the sponsored entities processed and settled $109.9 billion and $194.8 billion of transactions and recorded losses of $3 million and $5 million. A significant portion of this activity was processed by a joint venture in which the Corporation holds a 49 percent ownership. At June 30, 2012 and December 31, 2011, the sponsored merchant processing servicers held as collateral $265 million and $238 million of merchant escrow deposits which may be used to offset amounts due from the individual merchants.

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, 2012 and December 31, 2011, the maximum potential exposure for sponsored transactions totaled approximately $249.4 billion and $236.0 billion. However, the Corporation believes that the maximum potential exposure is not representative of the actual potential loss exposure and 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 VIEs that are not consolidated on the Corporation’s Consolidated Balance Sheet. At June 30, 2012 and December 31, 2011, the total notional amount of these derivative contracts was $3.2 billion and $3.2 billion with commercial banks and $1.6 billion and $1.8 billion with VIEs. 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 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 $3.7 billion at June 30, 2012 and December 31, 2011. The estimated maturity dates of these obligations extend up to 2033. The Corporation has made no material payments under these guarantees.

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 international 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 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 related to the sale of these insurance policies. In connection with this matter, the Corporation established a reserve for PPI. The reserve was $312 million and $476 million at June 30, 2012 and December 31, 2011.

Litigation and Regulatory Matters

The following supplements the disclosure in Note 14 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation's 2011 Annual Report on Form 10-K and in Note 10 - Commitments and Contingencies to the Consolidated Financial Statements of the Corporation's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2012 (the prior commitments and contingencies disclosure).
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, contract 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, 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 expenses of internal or external legal service providers, litigation-related expense of $963 million and $1.8 billion was recognized for the three and six months ended June 30, 2012 compared to $2.3 billion and $3.2 billion for the same periods in 2011.
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 $4.1 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.
Auction Rate Securities Litigation
Plaintiffs in Bondar v. Bank of America Corporation voluntarily dismissed the action on January 4, 2012. The dismissal is now effective.
Checking Account Overdraft Litigation
All appeals by the multi-district litigation class members but one were voluntarily dismissed by the appellants. The remaining appeal was dismissed by the U.S. Court of Appeals for the Eleventh Circuit on May 24, 2012.
Countrywide Bond Insurance Litigation
The Corporation, Countrywide Financial Corporation (CFC) and various other Countrywide entities are subject to claims from several monoline bond insurance companies. These claims generally relate to bond insurance policies provided by the insurers on certain securitized pools of home equity lines of credit (HELOC) and fixed-rate second-lien mortgage loans. Plaintiffs in these cases generally allege that they have paid claims as a result of defaults in the underlying loans and assert that these defaults are the result of improper underwriting by the defendants in breach of certain representations and warranties in the transaction documents.
FGIC
With respect to the actions filed by CFC and other Countrywide entities against Financial Guaranty Insurance Company (FGIC) and to enjoin certain actions by the New York State Department of Financial Services (NYSDFS), on June 28, 2012, the New York Supreme Court entered an agreed-upon order of rehabilitation. The order enjoins CFC and other Countrywide entities from continuing to prosecute the civil action filed against FGIC, as well as from exercising, enforcing or terminating rights related to the FGIC policies, and the NYSDFS petition.

Syncora

On July 17, 2012, the parties jointly stipulated to dismiss the action with prejudice as part of the settlement of issues between Syncora and the Corporation. The settlement provides for payment in an amount not material to the Corporation's results of operations, such amount having been fully accrued by the Corporation.

Identity Theft Protection

BANA and FIA have received inquiries from and have been in discussions with regulatory authorities concerning activities related to identity theft protection services, including customers who may have paid for but did not receive certain of such services from third-party vendors of BANA and FIA and whether appropriate oversight existed. The Corporation is responding to these inquiries.
 
Interchange and Related Litigation
On July 13, 2012, defendants, including the Corporation, and class plaintiffs in the In Re Payment Card Interchange Fee and Merchant Discount Anti-Trust Litigation (Interchange) filed a memorandum of understanding with the court regarding a global settlement of the Interchange litigation. The memorandum of understanding provides that defendants and class plaintiffs have agreed to enter a definitive settlement agreement that will provide, among other things, that all defendants will pay a total of $6.05 billion to class plaintiffs and that each network will make certain changes to network rules regarding merchant point of sale practices. Visa and MasterCard also have agreed to distribute to class members an amount equal to 10 bps of credit interchange rates for U.S. merchant class members for a period of eight months, beginning within 60 days after completion of the court-ordered period during which individual class members may opt out of the settlement. Such amounts otherwise would have been paid to Visa or MasterCard issuers, including the Corporation. In exchange, class plaintiffs have agreed to a broad release for defendants. The class action settlement agreement to be executed by the parties will be subject to court approval. In addition to settlement with the class plaintiffs, defendants in the individual actions also reached a settlement with plaintiffs in the individual actions. The settlement of the individual actions provides that all defendants will pay a total amount of $525 million.
Subject to the loss-sharing agreements the Corporation and certain affiliates previously entered into with Visa, MasterCard and other financial institutions, the Corporation will contribute a total of $738 million to the settlement of the class and individual actions. Of that amount, $539 million will be paid from the proceeds that Visa previously placed into an escrow fund pursuant to Visa's Retrospective Responsibility Plan (the RRP) to cover the Corporation's share of Visa-related claims. The Corporation has agreed to pay $199 million in cash for the MasterCard-related claims. The costs of the Interchange settlement have been fully accrued by the Corporation.

On December 10, 2010, a purported class of merchants that accept Visa and/or MasterCard credit cards in Canada filed an action in Quebec Superior Court entitled Quebec Inc. v. Visa Canada Corporation (Quebec, Inc.), against Visa and MasterCard. On March 30, 2012, plaintiffs amended the complaint to name as defendants the same parties, including the Corporation, that are named as defendants in Watson v. Bank of America Corp., currently pending in the Supreme Court of British Columbia (Watson), and Bancroft-Snell v. Visa Canada Corp., currently pending in Ontario Superior Court (Bancroft-Snell). On July 12, 2012, a similar purported class filed an action in the Court of Queen's Bench in Saskatchewan entitled Canada Rent A Heater (2000) Ltd. v. Bank of America Corp. (Canada Heater). The claims and damages asserted in Quebec Inc. and Canada Heater are similar to those asserted in Watson and Bancroft-Snell. The Quebec Inc. and Canada Heater actions are not covered by the RRP or loss-sharing agreements previously entered into by the Corporation.
On June 13, 2012, the court in Quebec Inc. stayed the action until June 21, 2013. The Bancroft-Snell action is being held in abeyance pursuant to a case management directive. Both the stay and abeyance were granted to permit litigation to proceed in the Watson action.
LIBOR Inquiries and Litigation
The Corporation has received subpoenas and information requests from government authorities including the U.S. Department of Justice, the U.S. Commodity Futures Trading Commission and the United Kingdom Financial Services Authority concerning submissions made by panel banks in connection with the setting of London interbank offered rates (LIBOR) and European and other interbank offered rates. The Corporation is cooperating with these inquiries.

In addition, the Corporation and BANA have been named as defendants along with most of the other LIBOR panel banks in a series of individual and class actions in various U.S. federal courts relating to defendants' LIBOR contributions. All cases naming the Corporation have been consolidated for pre-trial purposes in the U.S. District Court for the Southern District of New York by the Judicial Panel on Multi-district Litigation. The Corporation expects that any future cases naming the Corporation will similarly be consolidated for pre-trial purposes. Plaintiffs allege that they held or transacted in U.S. dollar LIBOR-based derivatives or other financial instruments and sustained losses as a result of collusion or manipulation by defendants regarding the setting of U.S. dollar LIBOR. They assert a variety of claims, including treble damage, antitrust and Racketeer Influenced and Corrupt Organizations claims.
Merrill Lynch Acquisition-related Matters
Securities Actions
On June 3, 2012, the parties in In re Bank of America Securities, Derivative and Employment Retirement Income Security Act (ERISA) Litigation, pending in the U.S. District Court for the Southern District of New York, filed motions seeking partial summary judgment. On July 23, 2012, the U.S. Court of Appeals for the Second Circuit denied the defendants' petition requesting review of the district court's February 6, 2012 order granting plaintiffs' motion for class certification. Trial is scheduled to commence on October 22, 2012.
Derivative Actions

On June 20, 2012, the court in In re Bank of America Securities, Derivative and Employment Retirement Income Security Act (ERISA) Litigation, pending in the U.S. District Court for the Southern District of New York, granted preliminary approval of the settlement of the derivative action. On May 9, 2012, the court in In re Bank of America Corporation Stockholder Derivative Action, pending in the Delaware Court of Chancery, denied plaintiff's motion to enjoin the proposed settlement in the New York derivative action, and stayed the action pending the New York court's consideration of the proposed settlement.
ERISA Actions
On July 16, 2012, the parties to the consolidated ERISA action stipulated to extend the time for plaintiffs to reinstate their appeal to January 21, 2013.
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 a number of 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; (iv) the underwriting practices by which those mortgage loans were originated; (v) the ratings given to the different tranches of MBS by rating agencies; and (vi) the validity of each issuing trust's title to the mortgage loans comprising the pool for that securitization (collectively, MBS Claims). Plaintiffs in these cases generally seek unspecified compensatory damages, unspecified costs and legal fees and, in some instances, seek rescission. A number of other entities, including the National Credit Union Administration, have threatened legal actions against the Corporation and its affiliates, Countrywide entities and their affiliates, and Merrill Lynch entities and their affiliates concerning MBS offerings. On August 15, 2011, the Judicial Panel on Multi-district Litigation ordered multiple federal court cases involving Countrywide MBS be consolidated for pre-trial purposes in the U.S. District Court for the Central District of California, in a multi-district litigation entitled In re Countrywide Financial Corp. Mortgage-Backed Securities Litigation (the Countrywide RMBS MDL).
AIG Litigation
On May 23, 2012, the court overseeing the Countrywide RMBS MDL proceedings dismissed with prejudice plaintiffs' federal securities claims and certain of the state law common law claims.
Bayerische Landesbank, New York Branch (Countrywide) Litigation

On May 21, 2012, Bayerische Landesbank, New York Branch filed a complaint against the Corporation, CFC and certain related entities. The action is entitled Bayerische Landesbank, New York Branch v. Countrywide Financial Corp. et al., and was filed in New York Supreme Court, New York County. The complaint asserts certain MBS Claims in connection with alleged purchases in 55 MBS tranches issued and/or underwritten by Countrywide entities between 2005 and 2007 and asserts successor liability against the Corporation and other entities. Plaintiff seeks, among other relief, rescission of the consideration plaintiff allegedly paid for the MBS, or alternatively, damages allegedly incurred by plaintiff, as well as punitive damages and legal fees and costs. On May 30, 2012, defendants removed the action to the U.S. District Court for the Southern District of New York. On June 15, 2012, the case was transferred to the Countrywide RMBS MDL.

Dexia Litigation
On June 1, 2012, the court granted in part defendants' motion to dismiss the amended complaint, dismissing with prejudice the state law negligent misrepresentation, aiding and abetting and successor liability claims, and all claims based on title transfer allegations.
FHFA Litigation

The Federal Housing Finance Agency (FHFA) cases against the Corporation, Merrill Lynch and related entities, along with fourteen other cases filed by the FHFA against other financial institutions, have been coordinated before a single judge in the U.S. District Court for the Southern District of New York. One action, FHFA v. UBS Americas, Inc., et al (the UBS Action), was designated the lead action with respect to legal actions common to the pending FHFA cases. On May 4, 2012, the court denied a motion to dismiss as to all claims except the negligent misrepresentation claim in the UBS Action. While the decision in the UBS Action does not dispose of any of the claims against the Corporation, Merrill Lynch or related entities, the FHFA has asserted claims against those entities that are similar to those asserted in the UBS Action. On June 19, 2012, the court certified the portion of its ruling in the UBS Action pertaining to the statute of repose on the federal and state securities law claims and the statute of limitations on the federal securities law claims for immediate appeal to the U.S. Court of Appeals for the Second Circuit.
On June 13, 2012, the FHFA filed an amended complaint in FHFA v. Merrill Lynch & Co., Inc., et al., pending in the U.S. District Court for the Southern District of New York. Among other things, the amended complaint adds a claim for consequential damages.
On June 28, 2012, the FHFA filed an amended complaint in FHFA v. Bank of America Corporation, et al., also pending in the U.S. District Court for the Southern District of New York. Among other things, the amended complaint adds a claim for consequential damages. 

On June 29, 2012, the FHFA filed an amended complaint in FHFA v. Countrywide Financial Corporation, et al., pending in the Countrywide RMBS MDL. Among other things, the amended complaint adds a claim for consequential damages.

Luther Litigation and Related Actions
On June 12, 2012, the Countrywide defendants removed the Luther v. Countrywide Financial Corporation, et al. and Western Conference of Teamsters Pension Trust Fund v. Countrywide Financial Corporation, et al. cases from the California Superior Court to the U.S. District Court for the Central District of California.
On May 23, 2012, the court denied Putnam Bank's motion to seek immediate interlocutory appeal of the court's order dismissing the case, in its entirety and with prejudice, as time-barred.
Sealink Litigation
On June 18, 2012, the court denied the Countrywide defendants' motion to dismiss the amended complaint on standing grounds, but ordered plaintiffs to provide additional information and legal authority regarding whether the causes of action plaintiff alleges were transferred or assigned to it.
Merrill Lynch MBS Litigation
On May 7, 2012, the court entered an order approving the settlement and dismissing the lawsuit with prejudice.
Mortgage Repurchase Litigation
Walnut Place Litigation
On June 28, 2012, the decision granting the dismissal of Walnut Place LLC, et al. v. Countrywide Home Loans, Inc. et al. (Walnut I) was affirmed by the New York Appellate Division, First Department.
In the second Walnut Place litigation (also entitled Walnut Place LLC, et al. v. Countrywide Home Loans, Inc. et al.), in which a motion to dismiss was pending, the parties stayed proceedings pending disposition of the appeal in Walnut I. The stay lifted following disposition of the appeal in Walnut I on June 28, 2012. Pursuant to a stipulation among the parties filed on July 27, 2012, the litigation was dismissed with prejudice.
Ocala Litigation
In the actions (the 2009 Actions) filed against BANA by BNP Paribas Mortgage Corporation and Deutsche Bank AG (the Investors), on June 5, 2012, the court granted plaintiffs' motion for leave to amend to include additional contractual, tort and equitable claims.
On June 5, 2012, the court granted the motion by BNP Paribas Securities Corp. and Deutsche Bank Securities, Inc. to dismiss BANA's third-party complaints.
On June 8, 2012, the Judicial Panel on Multi-district Litigation denied BANA's request to coordinate its suit against the Federal Deposit Insurance Corporation (the FDIC Action) with the 2009 Actions. The suit will thus proceed in the U.S. District Court for the District of Columbia.
On July 10, 2012, Ocala Funding, LLC (Ocala) filed a pre-arranged, voluntary Chapter 11 bankruptcy petition in the U.S. Bankruptcy Court for the Middle District of Florida, pursuant to an agreement among Ocala, BANA, the Investors, the FDIC, and Ocala's owner, Taylor, Bean & Whitaker Mortgage Corp. Among other things, the proposed bankruptcy plan and certain side agreements would permit the Ocala bankruptcy trustee to pursue litigation against third parties to mitigate BANA's potential losses in the FDIC Action and the 2009 Actions, permit the Ocala bankruptcy trustee to assign to the Investors certain alleged conversion claims against BANA which the Investors are expected to assert in the 2009 Actions, and secure certain releases for BANA from the Investors and the Ocala bankruptcy estate with regard to BANA's conduct on and after August 11, 2009. The proposed plan is subject to approval by the bankruptcy court.