8-KFinancial EventsOther EventsExhibits & Filings

BANK OF AMERICA CORP /DE/ 8-K Report, Material Impairment (Jan 3, 2011)

Filed January 3, 2011For Securities:BACBAC-PBBAC-PKBAC-PLBAC-PMBAC-PNBAC-PSBML-PJBAC-PEBAC-PPBAC-PQBACRPBML-PGBML-PHBML-PLBAC-POMER-PK

Summary

Bank of America Corporation (BAC) filed an 8-K on January 3, 2011, disclosing a significant non-cash goodwill impairment charge and important settlements related to mortgage loan repurchase claims. The company expects to record approximately $2 billion in goodwill impairment within its Home Loans & Insurance segment for the fourth quarter of 2010. This impairment is attributed to increased uncertainties including litigation, higher servicing costs, foreclosure issues, and the redeployment of sales resources. Furthermore, BAC announced agreements with Freddie Mac and Fannie Mae to resolve repurchase claims concerning residential mortgage loans previously sold by Countrywide Financial Corporation. These resolutions are critical as they address substantial potential liabilities and aim to bring certainty to the company's ongoing mortgage-related legal and financial challenges.

Key Highlights

  • 1Expects to record a non-cash goodwill impairment charge of approximately $2 billion in Q4 2010 for the Home Loans & Insurance segment.
  • 2Goodwill impairment is driven by increased uncertainties, including litigation exposure, higher servicing costs, foreclosure issues, and resource redeployment.
  • 3The impairment charge will not impact reported Tier 1 and tangible equity capital ratios.
  • 4Announced agreements with Freddie Mac to resolve repurchase claims on residential mortgage loans sold by Countrywide entities.
  • 5Announced agreements with Fannie Mae to resolve repurchase claims on residential mortgage loans sold by Countrywide entities.
  • 6These settlements aim to resolve significant repurchase claims related to the Countrywide acquisition.
  • 7Exhibit 99.1 contains the press release detailing these announcements.

Frequently Asked Questions

The company expects to record a non-cash, non-tax deductible goodwill impairment charge of approximately $2 billion in the fourth quarter of 2010. Importantly, this charge will not impact reported Tier 1 and tangible equity capital ratios.

The impairment is due to a decline in the estimated fair value of the Home Loans & Insurance business segment. This decline is driven by increased uncertainties, including existing and potential litigation, higher servicing costs, foreclosure-related issues, and the redeployment of centralized sales resources to address servicing needs.

Bank of America has reached agreements with Freddie Mac and Fannie Mae to resolve repurchase claims related to certain residential mortgage loans that were sold to them by entities of Countrywide Financial Corporation. These agreements aim to settle ongoing disputes and potential liabilities stemming from the Countrywide acquisition.

While these agreements address significant repurchase claims with Freddie Mac and Fannie Mae concerning Countrywide-originated loans, the filing doesn't explicitly state if all repurchase issues are resolved. However, it represents a substantial step towards resolving these liabilities.