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Legacy AAssett SServicing


ii

Terry Laughlin
Legacy Asset Servicing Executive
Key Takeaways

• Split of Legacy Asset Servicing from Bank of America Home Loans to


accomplish
p two g
goals:

ԟ Enable greater focus on the future of the mortgage business

ԟ Achieve resolution of legacy


g y issues

• Legacy Asset Servicing will focus on resolving legacy servicing and owned
portfolios

ԟ Provide delinquent customers with fair and transparent loan modification solutions

ԟ Continue to ensure timely execution of loss mitigation activities

ԟ Provide final resolution in decisions for customers, investors, and shareholders

• Manage remaining legacy costs and exposures

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Bank of America Home Loans and Legacy Asset Servicing
Scope of Responsibilities

Barbara Desoer Terry Laughlin


President, Bank of America Home Loans Legacy Asset Servicing Executive
• First Mortgage & Home Equity loan originations • Home Loan Default Servicing
– Credit policy and management, product – Outreach
development and pricing – Collections
– Consumer sales channels and referral – Modifications
partners – Short-sale, Deed-in-Lieu, Foreclosures
– Correspondent
C d t anddWWarehouse
h llending
di – Real
R lE Estate
t t Owned
O d
– Underwriting and fulfillment
– Secondary marketing • Legacy Portfolio Management
– Home retention and loss mitigation
• Home Loan Servicing
g strategies
g
– Customer Service – Portfolio liquidations
– Servicing Operations
– Investor Remittance • Representations & Warranties Resolution
– Government Sponsored Enterprises (GSEs)
• Mortgage Operations – Private investors
– Closing Services – Monolines
– Post Closing & Central Services

• Insurance Services
– Credit Protection
– Balboa Insurance Group through
transaction execution
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Legacy Asset Servicing Portfolio Composition

Servicing and owned portfolios are being split between Legacy Asset Servicing and Bank of America Home Loans
Total Portfolio
Owned Portfolio
(Owned and Serviced for Others)
Total by Count Owned by Count

Current
BAC Current
BAC
Home Home
Loans Legacy Loans
52% Legacy
Asset 49% Asset
Servicing Servicing
48% 51%

60+
60+
Delinquencies
Delinquencies

First Mortgage by Count Home Equity by Count


Residential Loan Portfolio Characteristics
Outstanding
Loan Count
Principal Balance
($B) (K)
Legacy BAC Total Portfolio1 $ 2,150 13,885
BAC Asset Home
Legacy
Loans
Home Servicing
43%
Asset Owned - First Mortgage 282 967
Loans 46% Servicing
54% Owned- Home Equity 136 2,583
57%
Serviced for GSE 961 5,882
Serviced for Ginnie Mae 258 1,564
Serviced for Others 454 2,462
Subserviced 58 426
4 Notes: (1) includes owned loans and loans serviced for others; all data shown is as of Q4 2010
Legacy Asset Servicing Portfolio Composition

Legacy Asset Servicing portfolio will include all discontinued products and guidelines

Bank of America Home Loans Legacy Asset Servicing

$1.1T Outstanding Principal Balance $1.0T Outstanding Principal Balance


7.2MM Loans 6.7MM Loans
Count by Vintage Count by Vintage
2009-2010
2003 & 3%
Prior
2003 &
13%
Prior
22%
2009-2010
38%

2004 2008
2004-2008
2004-2008
2004 2008
84%
40%

Count by Product
Count by
y Product
Discontinued
Home 14%
FHA/VA
Equity
Other 20% Home
18%
1% Equity
FHA/VA
28%
8%

Conventional
61% Other Conventional
3% 47%

5 Notes: All data shown is as of Q4 2010


Legacy Asset Servicing Organization

Our Focus

Representations
R t ti & Warranties
W ti
Home Loan Default Servicing Legacy Portfolio Management
Resolution

Our People

Terry Laughlin
Legacy Asset Servicing Executive

Tony Meola Eric Telljohann Helen Eggers Larry Washington


Default Credit Loss Mitigation Servicing Servicing Special
Servicing Strategies Initiatives Projects
(34 Years Banking Experience (23 Years Banking Experience (27 Years Banking Experience (30 Years Banking Experience
< 1 Year with Bank of America) 17 Years with Bank of America) 27 Years with Bank of America) 5 Years with Bank of America)

Sally Hawk George Ellison Mike Schloessmann


Quality Control & Retail MBS & Monoline Representations &
Improvement Strategy Warranties
916 Years Banking Experience (26 Years Banking Experience (18 Years Banking Experience
9 Years with Bank of America)) 15 Years with Bank of America)) 18 Years with Bank of America))

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Where We Are Today

Default Servicing Activity Default Servicing and Loss Mitigation Staffing


120,000
Completed Mods Completed Short Sales/DILs Foreclosure Sales
Total Staffing 60+ DQ Units Units (MM)
100,000
September 30,000 1.45 1.44 1.6
1.40 1.38 1.39
Run Rate
80,000 1.4
25,000
1.2
60,000 20,000
0.81 1.0
15,000
, 28 268
28,268 0.8
40,000 25,242
22,012 0.6
10,000 19,433
16,431 0.4
20,000
5,000 10,294
0.2
- - -
1Q08* 2Q08* 3Q08* 4Q08* Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q408 Q409 Q110 Q210 Q310 Q410
* excluding Merrill Lynch

• Completed 285,000 modifications in 2010 and • Key drivers of headcount growth


775,000 cumulative modifications to date as of – Q408: National Homeownership Retention
December 2010 Program (NHRP) launched; 1st foreclosure
• More
M than
th doubled
d bl d short
h t sales/deeds-in-lieu
l /d d i li moratorium
t i
resolutions – Q209: Home Affordable Modification Program
• Drop in foreclosure sales late 2010 due to launched (HAMP); 2nd foreclosure moratorium
foreclosure process hold in October – Q110: Second Lien Modification Program (2MP)
• Resumed foreclosure sales in most non
non- and NHRP principal reduction launched
judicial states in December 2010 – Q210: Home Affordable Foreclosure
Alternatives (HAFA) short sale program
launched
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Customer Outcomes – New 60+ Delinquent

In a sample of 100 new 60+ delinquent customers, only 14 are expected to meet all
requirements to enter a permanent HAMP loan modification

Starting
g Population:
p
New 60+ delinquent customers Unsuccessful

100

Financial
a c a Information
o at o

Provide at least stated financials and are No contact or do not


Foreclosure Alternatives
referred to HAMP underwriting process provide initial financials
72 28
Foreclosure is averted on 37 out of
• By foreclosure sale, each customer receives th 86 unsuccessful
the f l modifications
difi ti
Underwriting an average of 110 outbound calls and 8
letters 37
Pass underwriting and are extended Do not pass the
• 14 become current on their own
trial modifications underwriting process
• 13 complete a proprietary modification
20 52 • 10 expected to complete short sale/deed in lieu

• 46% have a debt-to-income ratio < 31%


• 17% don’t submit income or hardship documents
Trial Payments
• 23% have too little income

Complete
p trial payments
p y to reach Do not make all
permanent modification necessary trial payments

14 6

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Legacy Asset Servicing Priorities

Priority Key Initiatives

• Implement single point of contact and enhance case management model


Improve Default
Servicing Operations • Address regulatory servicing guidelines and standards

• Expand outreach events and in-market Customer Assistance Centers

• Execute
E t on existing
i ti h home retention
t ti programs

• Deploy alternatives to be more aggressive in:


Execute Home – Short-sales and deed-in-lieu programs
Retention Programs
and Resolution – Liquidation of real estate owned (REO) properties
Strategies
• When retention options are exhausted, deliver an efficient and respectful
foreclosure process

• Pursue servicing sales and asset portfolio sales

• Continue to build out additional capacity to manage representation and


Manage Legacy Costs warranty
y claims on a loan byy loan basis

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Representations and Warranties Update

Government Sponsored Enterprises Private Label, Whole Loan


(GSEs) Investors and Monolines

• Settlement with Freddie Mac extinguished • Experience with non-GSE remains limited
outstanding and potential repurchase and
make-whole claims for legacy Countrywide
• Estimate of upper range of possible loss
could be up to $7B to $10B over existing
• Settlement with Fannie Mae resolved the accruals - this does not represent a
existing pipeline of repurchase and make- probable loss
whole claims outstanding as of September
20, 2010
• Counterparties and their claims still have
significant legal and procedural hurdles to
• Based on the models derived from historical overcome
GSE experience, we believe we are 70 to
75% through the receipt of GSE repurchase
claims and have reserved appropriately

10
Key Takeaways

• Split of Legacy Asset Servicing from Bank of America Home Loans to


accomplish
p two g
goals:

ԟ Enable greater focus on the future of the mortgage business

ԟ Achieve resolution of legacy


g y issues

• Legacy Asset Servicing will focus on resolving legacy servicing and owned
portfolios

ԟ Provide delinquent customers with fair and transparent loan modification solutions

ԟ Continue to ensure timely execution of loss mitigation activities

ԟ Provide final resolution in decisions for customers, investors, and shareholders

• Manage remaining legacy costs and exposures

11
Appendix

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Representations and Warranties

Liability for Representations and Warranties Outstanding Claims by Counterparty

($MM) ($MM) 4Q09 1Q10 2Q10 3Q10 4Q10


2010
Beginning Balance $ 33,507
507 GSE $ 3
3,284
284 $ 4
4,094
094 $ 55,624
624 $ 6,819
6 819 $ 22,821
821
Provision 6,786 Monoline 2,944 3,169 4,114 4,304 4,799
1
Charge-offs (4,803) Other 1,372 1,575 1,428 1,826 3,067
Other Activity (52) Total $ 7,600 $ 8,838 $ 11,166 $ 12,949 $ 10,687
Ending Balance $ 5,438

New Claims Trend by Vintage2 Commentary


($MM) • 2010 representations and warranties provision of $6.8B
2010 Mix • Liability for Representation and Warranty claims increased $1.9B during
Pre 2005 $ 869 5% 2010 and now has $5.4B
2005 2 618
2,618 14% • Received $18.1B new claims in 2010; 73% from GSEs
2006 5,690 31%
• $15.3B of claims were resolved during the year
2007 7,573 42%
– $8.3B rescinded and $7.0B were approved for repurchase
2008 1,154 6%
– $4.8B of charge offs includes $1.3B paid in connection with the
Post 2008 244 1%
Legacy Countrywide Freddie Mac settlement
Ne Claims
New $ 18
18,148
148
• As of 12/31/10, we have $10.7B claims outstanding
% GSE 73%
− $2.8B GSE claims remain outstanding
Rescinded Claims 8,279 − $7.7B non-GSE repurchase claims remain outstanding on the
2004-2008 vintages
Approved Repurchases 6,998
o $4.1B have been reviewed and declined for repurchase
Outstanding Claims 10,687 o $1.7B in demands from private label securitization
investors who do not have the contractual right to demand
% GSE 26% repurchase of loans directly1
Notes: (1) includes $1.7B in claims contained in communications from private label securitizations investors that do not have the right to demand repurchase of loans directly or the right to access loan
13 files. The inclusion of these claims in the amounts noted does not mean that we believe these claims have satisfied the contractual thresholds to direct the securitization trustee to take action or are
otherwise procedurally or are substantively valid; (2) Includes Merrill Lynch and First Franklin
Private Label Representations and Warranties
We believe the agreements for private label securitizations generally contain less rigorous representations
and warranties and place higher burdens on investors seeking loan repurchases than the comparable
agreements with the GSEs. For example, borrower fraud representations and warranties were generally
not given in private label securitizations.

The following represent some of the typical private label securitization transaction terms:

• Representation of material compliance with underwriting guidelines (which often explicitly permit
exceptions)

• Virtually no transactions contain a representation that there has been no fraud or material
misrepresentation by a borrower or third party

• Many representations include materiality qualifiers

• Breach of representation must materially and adversely affect certificate holders’ interest in the loan

• No representation that the mortgage is of investment quality

• Offering documents included extensive disclosures, including detailed risk factors, description of
underwriting practices and guidelines, and loan attributes

• Only parties to a pooling and servicing agreement (e.g., the Trustee) can bring repurchase claims;
certificate holders cannot bring claims directly and do not have access to loan files—at least 25
percent of each tranche of certificate holders is g
p generally
y required
q in order to direct Trustee to review
loan files for potential claims. Certificate holders must bear costs of Trustee’s loan file review

• Repurchase liability is generally limited to seller


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