06-17-2011 COMPLAINT - Gastineau vs. Banksters of America fka Bank of America

8/6/2019 06-17-2011 COMPLAINT - Gastineau vs. Banksters of America fka Bank of America

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UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

DORIS GASTINEAU, an individual,

Plaintiff,

vs.

CHARLES K. GIFFORD, THOMAS J.MAY, BRIAN T. MOYNIHAN,CHARLES O. HOLLIDAY, JR.,MUKESH D. AMBANI, SUSAN S. BIES,FRANK P. BRAMBLE, SR., VIRGIS W.COLBERT, D. PAUL JONES, JR.,MONICA C. LOZANO, DONALD E.POWELL, CHARLES O. ROSSOTTI,ROBERT W. SCULLY, WILLIAM P.

BOARDMAN, BARBARA J. DESOERand KENNETH D. LEWIS,

Defendants,

and

BANK OF AMERICA CORPORATION,

Nominal Defendant.

))))))))))))))

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VERIFIED SHAREHOLDERDERIVATIVE COMPLAINT FORBREACH OF FIDUCIARY DUTYAND FOR VIOLATIONS OF 14(a) AND 20(a) OF THESECURITIES EXCHANGE ACTOF 1934

JURY TRIAL DEMANDED

Case 1:11-cv-11096 Document 1 Filed 06/17/11 Page 1 of 78

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Plaintiff Doris Gastineau (Plaintiff), by and through her attorneys, derivatively on

behalf of nominal defendant Bank of America Corporation (Bank of America or the Com-

pany), submits this Verified Shareholder Derivative Complaint against the defendants named

herein. Plaintiffs allegations are based on personal knowledge as to herself and her own acts,

and upon information and belief developed from the investigation and analysis of her counsel,

which include, among other things, public filings by Bank of America with the U.S. Securities

and Exchange Commission (SEC), press releases, news reports, analyst reports, matters of

public record available from various state and federal government websites, complaints pending

against the Company in state and federal courts, and other information available in the public

domain. To the best of Plaintiffs knowledge, information, and belief, the allegations herein not

based on personal knowledge are likely to have evidentiary support after a reasonable

opportunity for further investigation, discovery, and analysis.

I. SUMMARY OF THE ACTION

1. This is a shareholder derivative action brought on behalf and for the benefit ofBank of America against certain of its current and former directors. Bank of America is a global

financial services company, and provides consumers, corporations, governments and institutions

with a range of financial products and services. Plaintiff seeks to remedy the serious financial

and reputational harm that Bank of America has suffered, and will continue to suffer, from the

inadequate servicing of its troubled residential mortgage loans. Plaintiff also seeks redress for

the Companys false and misleading Schedule 14A definitive proxy statement filed with the SEC

on March 30, 2011 (the Proxy).

2. Bank of America finds itself in this predicament because the IndividualDefendants named herein breached their fiduciary duties of loyalty to the Company and its

shareholders from at least January 1, 2009 to the present (the Relevant Period). Specifically,

they failed to implement and maintain adequate internal controls to manage the foreseeably

immense financial fall-out from inadequate residential mortgage loan underwriting standards

even though they reviewed, approved, and caused the Company to file financial statements


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during that time with the SEC that depicted the Companys increasingly distressed residential

mortgages in the magnitude of multiple billions of dollars of potential exposure. Moreover,

these defendants have utterly failed and refused to pursue pecuniary relief for the Company

against any of the wrongdoers.

3. On April 13, 2011, the Office of the Comptroller of the Currency (OCC)publicized findings from its fourth quarter 2010 investigation into Bank of Americas mortgage

servicing and foreclosure processing practices. As a result of that investigation, the OCC

concluded that Bank of America (through its wholly-owned subsidiary, Bank of America, N.A.):

engaged in improper servicing and foreclosure practices; lacked sufficient resources to ensure

proper administration of its foreclosure processes; lacked adequate oversight, internal controls,

policies, and procedures, compliance risk management, internal audit, third party management,

and trained personnel; failed to supervise outside counsel and other third parties handling

foreclosure-related services; and engaged in unsafe or unsound banking practices. The above

findings were made public in the OCCs formal enforcement agreement with Bank of America as

set forth in the Stipulation and Consent to the Issuance of a Consent Order entered In the Matter

of: Bank of America, N.A. Charlotte, NC AA-EC11-12 (the OCC Consent Order).

4. A few days prior to publication of the Consent Order, on March 29, 2011,Individual Defendants Susan S. Bies, Frank P. Bramble, Sr., Virgis W. Colbert, Charles K.

Gifford, Charles O. Holliday, Jr., D. Paul Jones, Jr., Monica C. Lozano, Thomas J. May, Brian T.

Moynihan, Donald E. Powell, Charles O. Rossotti, and Robert W. Scully executed the stipulation

agreeing to the issuance of the OCC Consent Order. This order took effect on April 13, 2010

upon its execution by an OCC official.

5. That same day, the Federal Reserve publicized the consent order to cease anddesist captioned In the Matter of BANK OF AMERICA CORPORATION Charlotte, North

Carolina, Docket No. 11-029-B-HC (the Federal Reserve Consent Order), approved of by

Bank of Americas board of directors (the Board) at a duly constituted meeting and that

requires them to ensure that Bank of America, N.A. performs its obligations under the OCC


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Consent Order and to submit written plans to the Federal Reserve for its approval that would

remedy the control failures discussed herein.

6. While these consent orders provide for the implementation of some importantreforms to Bank of Americas internal controls relative to its default loan management,1 they fall

well short in another aspect of paramount importance to the Companynamely, there is zero

monetary consideration to be provided by the Individual Defendants named herein, or by anyone

else, to the Company for their wrongdoing. The signatories to these consent orders were

perfectly aware of the problems embodied withinor reflectedby them. They were willing to

agree to partial remedial action only after causing the Company to expend significant resources

responding to, and negotiating with, the OCC and other regulators, and to incur significant

expenditures to defend its interests in litigation across the country plagued with reported

residential mortgage loan modification and foreclosure irregularitiesmany of which were

undisputed by the Company.

7. Further, despite the Boards knowledge of the irregularities that plagued theCompanys default loan management, including the executed consent orders, the Board

authorized the filing of the Proxy without making reference to the OCC Consent Order, and

failed to cause the Company to publish an amended Proxy that referred to that order or the

Federal Reserve Consent Order. At the same time, the Board recommended that shareholders

vote against a proposal made by a coalition of institutional shareholders to investigate, report the

results of such investigation to shareholders, and to reform a significant portion of the

Companys internal controls relative to default loan management. The Boards spin on the

proposal was that [t]he substantial measures our company has taken to enhance our residential

mortgage loss mitigation and foreclosure processes, together with the extensive public

disclosures our company has already provided regarding the requested information, adequately

address the concerns underlying the proposal.

1 Default loan management refers to residential home loan collections, loss mitigation,bankruptcy, foreclosure, real estate owned and post-foreclosure claims processing.


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8. The Individual Defendants, however, now appear willing to cause Bank ofAmerica to participate in a settlement with the Attorneys General of several states in which the

Company is to pay a share of at least $5 billion related to alleged improper residential mortgage

loan servicing practices.

9. As a result of the Individual Defendants consciously willful inaction, Bank ofAmerica not only failed to pursue remedies against those who were responsible for the

misconduct alleged herein, it also failed to devote adequate resources to the management of its

billions of dollars of troubled loans. As a result, the Company has suffered, and will continue to

suffer, huge amounts of damages from, inter alia, (a) losses associated with foreclosure

proceedings that have been delayed, dismissed, and/or refilled due to improperly-documented

ownership interests; (b) expenditures related to the defense of put-back, qui tam, homeowner,

and robo-signer litigation commenced against the Company or its subsidiaries during the

Relevant Period; (c) book value losses to its mortgage servicing rights; (d) expenditures related

to the fourth quarter 2010 interagency review of Bank of Americas foreclosure policies and

practices conducted by OCC, the Federal Reserve System, the Federal Deposit Insurance

Corporation, and the Office of Thrift Supervision; (e) monies that it will be obligated to repay to

borrowers in connection with financial injury caused by errors, misrepresentations, or other

improper foreclosure practices; and (f) reputational damages.

II. JURISDICTION AND VENUE

10. This Court has jurisdiction over all counts alleged herein pursuant to 29 U.S.C.1332(a)(2) in that Plaintiff and all defendants are citizens of different states and the matter in

controversy exceeds $75,000, exclusive of interest and costs. For Plaintiffs claims for violations

of sections 14(a) and 20(a) of the Securities and Exchange Act of 1934 (15 U.S.C. 78a et seq.,

the Exchange Act) and SEC Rule 14a-9 promulgated thereunder, this Court has jurisdiction

pursuant to section 27 of the Exchange Act. This action is not brought collusively to confer

jurisdiction on a court of the United States that it would not otherwise have. This Court has


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supplemental jurisdiction over the state law causes of action alleged herein pursuant to 28 U.S.C.

1367(a).

11. Venue is proper in this District pursuant to 28 U.S.C. 1391(a) because one ormore of the defendants either resides or maintains executive offices in this District, a substantial

portion of the transactions and wrongs complained of occurred in the District of Massachusetts,

and certain of the defendants have received substantial compensation in this District by doing

business here and engaging in numerous activities that had an effect here.

III. PARTIES

12. Plaintiff Doris Gastineau was a shareholder of Bank of America common stock atall times during the Relevant Period, and is a current shareholder of the Company. She is a

citizen of the state of Arkansas.

13. Nominal defendant Bank of America Corporation (together, with its consolidatedsubsidiaries, Bank of America or the Company) is organized under the laws of the State of

Delaware and has its principal executive offices at Bank of America Corporate Center, 100

North Tryon Street, Charlotte, North Carolina. Bank of America is one of the worlds largest

financial institutions, serving individual consumers, small- and middle-market businesses, large

corporations and governments with a full range of banking, investing, asset management and

other financial and risk management products and services. Through its banking subsidiaries and

various nonbanking subsidiaries throughout the United States and in certain international

markets, the Company provides a diversified range of banking and nonbanking financial services

and products through six business segments: Deposits, Global Card Services, Home Loans &

Insurance, Global Commercial Banking, Global Banking & Markets, and Global Wealth &

Investment Management, with the remaining operations recorded in All Other. At year-end

2008, theHome Loans & Insurance segment has been a material part of the Company and at all

times relevant to this action, residential mortgage loans held by the Company comprised

approximately 13% or more of its total earning assets.


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14. Defendant Charles K. Gifford has been a director of Bank of America since April2004 and formerly served as its Chairman. He chairs the Boards Credit Committee and is a

member of its Executive Committee. The Board determined that he is not independent. His other

experience includes Chairman and Chief Executive Officer of FleetBoston Financial

Corporation, which was acquired by Bank of America in April 2004, and is a trustee of NSTAR.

Gifford is a resident of Massachusetts.

15. Defendant Thomas J. May has been a director of Bank of America since April2004. He chairs the Boards Corporate Governance Committee and is a member of the

Enterprise Risk Committee. His other experience includes President, Chief Executive Officer

and Chairman of NSTAR and as a director of FleetBoston Financial Corporation, which was

acquired by Bank of America in June 2004. May is a resident of Massachusetts.

16. Defendant Brian T. Moynihan has been a director of Bank of America and itsPresident and Chief Executive Officer since January 2010. He is a member of the Boards

Executive Committee. The Board determined that he is not independent. His prior experience

includes service as Executive Vice President of FleetBoston Financial Corporation, which was

acquired by Bank of America in June 2004. Moynihan is a resident of Massachusetts.

17. Defendant Charles O. Holliday, Jr. has been a director of Bank of America sinceSeptember 2009 and its Chairman since April 2010. His other experience includes Chairman

and Chief Executive Officer of DuPont de Nemours and Company. Holliday is a resident of

Delaware.

18. Defendant Mukesh D. Ambani has been a director of Bank of America sinceMarch 2011. He is a member of the Boards Compensation and Benefits Committee and of the

Credit Committee. His other experience includes Chairman and Managing Director of Reliance

Industries Limited. Ambani is a resident of India.

19. Defendant Susan S. Bies has been a director of Bank of America since June 2009.She is a member of the Boards Audit Committee (and determined by the Board to be an audit

committee financial expert as defined by the SEC) and the Enterprise Risk Committee. Her other


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experience includes service as a member of the Board of Governors of the Federal Reserve

System, Senior Advisory Board Member to Oliver Wyman Group, a member of the SEC

Advisory Committee on Improving Financial Reporting, and Chief Financial Officer of First

Tennessee National Corporation. Bies is a resident of South Carolina.

20. Defendant Frank P. Bramble, Sr. has been a director of Bank of America sinceJanuary 2006. He chairs the Boards Enterprise Risk Committee. His other experience includes

Vice Chairman of MBNA Corporation and Chairman of Allfirst Financial, Inc. and Allfirst

Bank. Bramble is a resident of Maryland.

21. Defendant Virgis W. Colbert has been a director of Bank of America sinceJanuary 2009. He is a member of the Boards Corporate Governance Committee and the

Enterprise Risk Committee. His other experience includes Executive Vice President of

Worldwide Operations for Miller Brewing Company. Colbert is a resident of Wisconsin.

22. Defendant D. Paul Jones, Jr. has been a director of Bank of America since June2009. He is a member of the Boards Audit Committee (and determined by the Board to be an

audit committee financial expert as defined by the SEC) and the Corporate Governance

Committee. His other experience includes Chairman and Chief Executive Officer of Compass

Bancshares, Inc. and as a member of the Board of the Federal Reserve Bank of Atlanta. Jones is

a resident of Alabama.

23. Defendant Monica C. Lozano has been a director of Bank of America since April2006. She is a member of the Boards Corporate Governance Committee, Credit Committee,

and Executive Committee. Her other experience includes Chief Executive Officer of

ImpreMedia, LLC, President and Chief Operating Officer of Lozano Enterprises, and

membership on President Obamas Economic Recovery Advisory Board. Lozano is a resident of

California.

24. Defendant Donald E. Powell has been a director of Bank of America since June2009. He is a member of the Boards Audit Committee (and determined by the Board to be an

audit committee financial expert as defined by the SEC), the Compensation and Benefits


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Committee, and the Executive Committee. His other experience includes Chairman of the

Federal Deposit Insurance Corporation and Chairman, Chief Executive Officer and President of

The First National Bank of Amarillo. Powell is a resident of Texas.

25. Defendant Charles O. Rossotti has been a director of Bank of America sinceJanuary 2009. He chairs the Boards Audit Committee (and determined by the Board to be an

audit committee financial expert as defined by the SEC). His other experience includes Senior

Advisor to The Carlyle Group, Commissioner of Internal Revenue of the Internal Revenue

Service, and co-founder of American Management Systems, Inc. Rossotti is a resident of the

District of Columbia.

26. Defendant Robert W. Scully has been a director of Bank of America since August2009. He is a member of the Boards Audit Committee (and determined by the Board to be an

audit committee financial expert as defined by the SEC) and chairs the Compensation and

Benefits Committee. His other experience includes membership of the Office of the Chairman

of Morgan Stanley and as its co-President, Managing Director of Lehman Brothers and

Managing Director of Salomon Brothers. Scully is a resident of New York.

27. Defendant William P. Boardman served as a director of Bank of America betweenJune 2009 and May 11, 2011. He was a member of the Boards Compensation and Benefits

Committee and of the Credit Committee. His other experience includes Vice Chairman of Bank

One Corporation, Chairman of Visa International, and Senior Advisor to The Goldman Sachs

Group. Boardman is a resident of Florida.

28. Defendant Barbara J. Desoer has served as President of Bank of America HomeLoans and Insurance since July 2008. She is a resident of California.

29. Defendant Kenneth D. Lewis served as Chief Executive Officer of Bank ofAmerica from April 1, 2001 to December 31, 2009, and served as its President from July 1, 2004

to December 31, 2009. He had served as its Chairman from February 2005 until the Companys

shareholders stripped him of that position in April 2009. He also served as Chief Executive


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Officer, President and a director of Bank of America, N.A. until December 31, 2009. Lewis is a

resident of North Carolina.

30. The defendants named in paragraphs 14-26 above may be collectively referred toas the Director Defendants. The defendants named in paragraphs 14-29 above may be

collectively referred to as the Individual Defendants.

IV. FACTUAL BACKGROUND

A. Bank of Americas Dramatically Increased Presence in the U.S. Mortgage ServicingBusiness.

31. On July 1, 2008, Bank of America announced that it completed its purchase ofCountrywide Financial Corp. The acquisition created one of the nations largest mortgage

originators and servicers.

32. In its Form 10-K for fiscal year 2008, the Company characterized certain of itsresidential mortgage loans as SOP 03-3 to identify them as loans having evidence of credit

quality deterioration since origination and for which it was probable at the time of purchase that

the Company would be unable to collect all contractually required payments. At the end of

2008, the unpaid principal balance of such loans was $55.4 billion.

33. TheHome Loans & Insurance segment of the Company accounts for nearly 20%of the U.S. first mortgage origination market, making Bank of America the nations largest

mortgage service. By March 31, 2010, its servicing portfolio totaled 13,739,823 loans for an

unpaid principal balance of approximately $2.14 trillion.2

B. The Federal Bailout of the Company and its Servicing-Related Promises.

34. In early October 2008, TARP was signed into law. Under TARP, the U.S.Department of the Treasury may purchase a variety of troubled assets, including mortgage-

related assets and the various types of securities based on such assets, if they were originated on

2 Moodys Investor Service, Moodys places Bank of Americas primary and special servicerquality ratings on review for possible downgrade (October 4, 2010.)


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or before March 14, 2008. The Treasury Department also was authorized to expend billions of

dollars to purchase bank equity shares through the Capital Repurchase Program.

35. At the same time, Congress created the Congressional Oversight Panel (theCOP) to review the current state of financial markets and the regulatory system. The COP

was empowered to hold hearings, review official data, and write reports on actions taken by

Treasury and financial institutions and their effect on the economy. Through regular reports, the

COP must oversee Treasurys actions, assess the impact of spending to stabilize the economy,

evaluate market transparency, ensure effective foreclosure mitigation efforts, and guarantee that

Treasurys actions are in the best interests of the American people.

36. Consistent with the TARP mandate, the Treasury Department also implementedHAMP, which is a national mortgage modification program that provides eligible borrowers the

opportunity to modify their first lien mortgage loans to make them more affordable. Any lending

institution that has accepted TARP funds must participate in HAMP, and must apply a uniform

loan modification process to provide eligible borrowers with affordable and sustainable monthly

payments for their first lien mortgage loans. Affordability is achieved through the application of

interest rate reduction, term extension, principal forbearance and/or principal forgiveness.

37. On October 13, 2008, defendant Lewis, and representatives from eight other largefinancial institutions (including one subsequently acquired by the CompanyMerrill Lynch &

Co., Inc. (Merrill Lynch)) attended a meeting in Washington D.C. with the senior officials of

the Federal Reserve, U.S. Treasury, and Federal Deposit Insurance Corporation (FDIC) to

discuss a federal solution to the stress being experienced by the U.S. financial system. As

authorized by TARP, the institutions agreed to participate in a program involving bank liability

guarantees and capital purchases by the federal government. The CEO Talking Points for this

meeting indicate that Lewis and the other financial institution executives in attendance were

instructed as follows: we want each of you to contact your Boards of Directors and confirm

your participation this evening.


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38. As a result of this meeting, and having consulted the Companys Board, Lewisexecuted a Major Financial Institution Participation Commitment dated October 13, 2008,

which provided as follows:

In support of the US financial system and the broader US economy, Bank ofAmerica agrees to:

Issue Preferred Shares in the amount of $15 billion to the U.S.Treasury under the terms and conditions of the TARP Capital PurchaseProgram announced today.

Participate in the FDIC program guaranteeing new issues of eligiblesenior liabilities by banks and bank holding companies and transactionaccounts as announced today under the systemic risk exemptioninvoked by the FDIC, U.S. Treasury, and the Federal Reserve.

Expand the flow of credit to U.S. Consumers and businesses oncompetitive terms to promote the sustained growth and vitality of theU.S. economy.

Continue to work diligently, under existing programs, to modify theterms of residential mortgages as appropriate to strengthen the healthof the U.S. housing market.

39. Similarly, Merrill Lynchs CEO executed a Major Financial InstitutionParticipation Commitment dated October 13, 2008, which provided as follows:

In support of the US financial system and the broader US economy, Merrill Lynch

agrees to: Issue Preferred Shares in the amount of $10 billion to the U.S.

Treasury under the terms and conditions of the TARP Capital PurchaseProgram announced today.

Participate in the FDIC program guaranteeing new issues of eligiblesenior liabilities by banks and bank holding companies and transactionaccounts as announced today under the systemic risk exemptioninvoked by the FDIC, U.S. Treasury, and the Federal Reserve.

Expand the flow of credit to U.S. Consumers and businesses oncompetitive terms to promote the sustained growth and vitality of theU.S. economy.

Continue to work diligently, under existing programs, to modify theterms of residential mortgages as appropriate to strengthen the healthof the U.S. housing market.

40. As a result of entering into the Major Financial Institution ParticipationCommitment in October 2008, Bank of America issued to the U.S. Treasury 600,000 shares of

Bank of America Corporation Fixed Rate Cumulative Perpetual Preferred Stock, Series N, for


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$15 billion. Also, as part the Companys acquisition of Merrill Lynch, in January 2009, the

Company issued to the U.S. Treasury 400,000 shares of Bank of America Corporation Fixed

Rate Cumulative Perpetual Preferred Stock, Series Q, for $10 billion. The Series N and Q

Preferred Stock initially pay quarterly dividends at a five percent annual rate that increases to

nine percent after five years. In connection with these investments, the Company also issued to

the U.S. Treasury 10-year warrants to purchase approximately 121.8 million shares of Bank of

America Corporation common stock.

41. As part of the Merrill Lynch acquisition, in January 2009 the Company issued tothe U.S. Treasury an additional 800,000 shares of Bank of America Corporation Fixed Rate

Cumulative Perpetual Preferred Stock, Series R, for $20 billion. The Series R Preferred Stock

pays dividends at an eight percent annual rate and may only be redeemed after the Series N and

Q Preferred Stock have been redeemed. In connection with this investment, the Company also

issued to the U.S. Treasury 10-year warrants to purchase approximately 150.4 million shares of

Bank of America Corporation common stock.

42. In April 2009, Bank of America, via its Bank of America, N.A. business unit, alsoagreed to participate in HAMP. That month, Bank of America signed a Servicer Participation

Agreement (amended and restated in January 2010) agreeing to perform loan modification and

other foreclosure prevention services set forth in applicable HAMP guidelines and other

procedures issued by the Treasury Department, Fannie Mae or Freddie Mac. In doing so, Bank

of America became eligible to receive $1,000 or more for each completed permanent

modification under HAMP. It also agreed to implement the following internal controls:

Servicer shall develop, enforce and review on a quarterly basis for effectivenessan internal control program designed to: (i) ensure effective delivery of Services

in connection with the Program and compliance with the ProgramDocumentation; (ii) effectively monitor and detect loan modification fraud; and(iii) effectively monitor compliance with applicable consumer protection and fairlending laws. The internal control program must include documentation of thecontrol objectives for Program activities, the associated control techniques, andmechanisms for testing and validating the controls.

Servicer shall provide Freddie Mac with access to all internal control reviews andreports that relate to Services under the Program performed by Servicer and itsindependent auditing firm to enable Freddie Mac to fulfill its duties as a


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compliance agent of the United States; a copy of the reviews and reports will beprovided to Fannie Mae for record keeping and other administrative purposes.

V. THE INDIVIDUAL DEFENDANTS WRONGFUL CONDUCT

A. Defendants Knew that Bank of America Required Significant Additional ResourcesTo Properly Discharge its Default Loan Management Responsibilities.

43. On December 30, 2008, during a special meeting of the Companys Board, Lewisadvised Bramble, Gifford, May, Lozano, and Moynihan that during managements recent

discussions with federal regulators, they expressed their dim view of the economy and

concern regarding the Corporations ability to remain stable in light of their own view of the

economy, the Corporations earnings prospects and the stability of the banking industry. Lewis

described the federal regulators dim view of the near term economy and their projections of the

economys impact on the Corporations earning prospects for 2009.

44. On February 27, 2009, Individual Defendants Lewis, Bramble, Colbert, Gifford,Lozano, May and Rossotti caused the Company to file its 2008 Form 10-K with the SEC. In

doing so, these defendants certified and/or were responsible for discussing known trends, events

or uncertainties reasonably likely to have a material effect on the Companys results of

operations or financial condition. The 2008 Form 10-K stated that the Company faced the

following risks, among others:Business and economic conditions. . Given the concentration of our

business activities in the United States, we are particularly exposed to downturnsin the U.S. economy. For example, in a poor economic environment there is agreater likelihood that more of our customers or counterparties could becomedelinquent on their loans or other obligations to us, which, in turn, could result ina higher level of charge-offs and provision for credit losses, all of which wouldadversely affect our earnings.

***

Instability of the U.S. financial system. Beginning in the fourth quarterof 2008, the U.S. government has responded to the ongoing financial crisis and

economic slowdown by enacting new legislation and expanding or establishing anumber of programs and initiatives. Congress and the U.S. governmentcontinue to evaluate and develop various programs and initiatives designed tostabilize the financial and housing markets and stimulate the economy, includingthe U.S. Treasurys recently announced Financial Stability Plan and the U.S.governments recently announced foreclosure prevention program. The failureof these efforts to stabilize the financial markets and a continuation or worseningof current or financial market conditions could materially and adversely affect ourbusiness, financial condition, results of operations, access to credit, or the tradingprice of our common stock and other equity and debt securities.


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***

Credit and concentration risk. When we loan money, commit to loanmoney or enter into a letter of credit or other contract with a counterparty, weincur credit risk, or the risk of losses if our borrowers do not repay their loans orour counterparties fail to perform according to the terms of their contracts. Asone of the nations largest lenders, the credit quality of our portfolio can have asignificant impact on our earnings. Negative economic conditions are likely toadversely affect our home equity line of credit, credit card and other loanportfolios, including causing increases in delinquencies and default rates, whichwe expect could impact our charge-offs and provision for credit losses. Wehave experienced concentration of risk with respect to our consumer real estateand credit card portfolios, each of which represents a large percentage of ouroverall credit portfolio. The current financial crisis and economic slowdown hasadversely affected these portfolios and exposed this concentration of risk.Continued deterioration in real estate values and household incomes could resultin materially higher credit losses.

***

Reputational risks. Our ability to attract and retain customers andemployees could be adversely affected to the extent our reputation is damaged.Our actual or perceived failure to address various issues could give rise toreputational risk that could cause harm to Bank of America and our subsidiariesand our business prospects. These issues include, but are not limited to,appropriately addressing potential conflicts of interest; legal and regulatoryrequirements; ethical issues; money-laundering; privacy; properly maintainingcustomer and associate personal information; record keeping; sales and tradingpractices; and the proper identification of the legal, reputational, credit, liquidityand market risks inherent in our products. Failure to appropriately address anyof these issues could also give rise to additional regulatory restrictions,reputational harm and legal risks, which could among other things increase thesize and number of litigation claims and damages asserted or subject us to

enforcement actions, fines and penalties and cause us to incur related costs andexpenses.

45. The Individual Defendants also acknowledged in the 2008 Form 10-K thatpotentially hundreds of thousands of the Companys residential borrowers, representing

approximately $100 billion in mortgage financings, would require the Companys assistance

with loan modifications.

46. On May 7, 2009, Individual Defendants Lewis, Gifford, May, Bramble, Colbert,Lozano and Rossotti caused the Company to file its Form 10-Q for the quarter-ended March 31,

2009 with the SEC. For that quarter, non-performing residential mortgage loans rose to $10.8

billion from $7 billion at year-end 2008. Residential mortgage loans past due by 90 days or

more rose to $411 million from approximately $370 million at year-end 2008. Non-performing

residential mortgage loans and residential mortgage loans past due by 90 days or more together


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represented about 4.3% of the Companys $261 billion of outstanding residential mortgage loans,

up from about 2.9% at year-end 2008. Provision for credit losses associated with theHome Loan

& Insurance business segment increased $1.6 billion to $3.4 billion compared to the three

months ended March 31, 2008 driven by reserve increases in the home equity portfolio

associated with a reduction in principal cash flows expected to be collected on the Countrywide

SOP 03-3 portfolio and higher net charge-offs reflective of deterioration in the economy and the

housing markets particularly in geographic areas that have experienced higher unemployment

and the most significant declines in home prices.Home Loans & Insurance recorded a net loss

of $498 million.

47. Item 2 within the May 7, 2009 Form 10-Q contained Managements Discussionand Analysis of Financial Condition and Results of Operations (MDA) explained, in part:

First Quarter 2009 Economic Environment

During the first quarter of 2009, credit quality deteriorated further as theeconomy continued to weaken. Consumers experienced high levels of stressfrom higher unemployment and underemployment as well as further declinesin home prices. These factors combined with further reductions in spending byconsumers and businesses and continued turmoil in the financial marketsnegatively impacted the commercial portfolio. These conditions drove increasesin consumer and commercial net charge-offs, and nonperforming assets aswell as higher commercial criticized utilized exposure and reserve increasesacross most portfolios during the three months ended March 31, 2009. For moreinformation on credit quality, see the Credit Risk Management discussionbeginning on page 130.

* * *

The above conditions, together with deterioration in the overall economy, willcontinue to affect many of the markets in which we do business and mayadversely impact our results for the remainder of 2009. The degree of the impactis dependent upon the duration and severity of such conditions.

48. On August 7, 2009, Individual Defendants Lewis, Gifford, May, Bramble, Bies,Colbert, Lozano, and Rossitti caused the Company to file its Form 10-Q for the quarter ended

June 30, 2009 with the SEC. For that quarter, non-performing residential mortgage loans rose to

$13.6 billion. Residential mortgage loans past due by 90 days or more rose to $477 million.

Non-performing residential mortgage loans and residential mortgage loans past due by 90 days

or more together represented about 5.7% of the Companys $246 billion of outstanding


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residential mortgage loans. Provision for credit losses associated with the Home Loan &

Insurance business segment increased $692 million to $2.7 billion compared to the three months

ended June 30, 2008 driven by economic and housing market weaknesses particularly in

geographic areas experiencing higher unemployment and falling home prices. In addition,

reserves were increased in the Countrywide SOP 03-3 portfolio reflecting a reduction in

expected principal cash flows. Home Loans & Insurance recorded a net loss of $725 million.

49. The MDA contained in the August 7, 2009 Form 10-Q explained, in part:Second Quarter 2009 Economic Environment

During the first six months of 2009, credit quality deteriorated further asthe global economy continued to weaken. Consumers experienced high levels ofstress from higher unemployment and underemployment as well as further

declines in home prices. Consumer net charge-offs in our consumer realestate portfolios increased reflecting deterioration in the economy andhousing markets particularly in geographic areas that have experienced the mostsignificant declines in home prices. The weak economy also drove higher lossesin the consumer credit card portfolio. These factors combined with furtherreductions in spending by consumers and businesses also negatively impacted thecommercial portfolio. Higher commercial net charge-offs were driven bycommercial real estate, reflecting deterioration across various property types, andthe commercial domestic portfolio, reflecting broad-based deterioration in termsof borrowers and industries. In addition to increased net charge-offs,nonperforming assets and commercial criticized utilized exposure were higherand reserves were increased across most portfolios during the six months endedJune 30, 2009. For more information on credit quality, see the Credit RiskManagement discussion beginning on page 155.

* * *

The above conditions, together with continued weakness in the overall economy,will continue to affect many of the markets in which we do business and mayadversely impact our results for the remainder of 2009. The degree of the impactis dependent upon the duration and severity of such conditions.

50. On November 6, 2009, Individual Defendants Lewis, Gifford, May, Holliday,Bies, Bramble, Colbert, Jones, Lozano, Powell, Rossotti, and Boardman caused the Company to

file its Form 10-Q for the quarter-ended September 30, 2009. For that quarter, non-performing

residential mortgage loans rose to $15.5 billion. Residential mortgage loans past due by 90 days

or more rose to $2.325 billion. Non-performing residential mortgage loans and residential

mortgage loans past due by 90 days or more together represented about 7.5% of the Companys

$239 billion of outstanding residential mortgage loans. Provision for credit losses associated


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with the Home Loan & Insurance business segment increased $2.1 billion to $2.9 billion

compared to the three months ended September 30, 2008 driven by economic and housing

market weakness particularly in geographic areas experiencing higher unemployment and falling

home prices. In addition, reserves were increased by $726 million in the Countrywide

purchased impaired loan portfolio reflecting a reduction in expected principal cash flows. Home

Loans & Insurance recorded a net loss of $1.632 billion.

51. The MDA contained in the November 6, 2009 Form 10-Q explained, in part:2009 Environment

The economic recession accelerated in late 2008 and continued to deepen intothe first half of 2009 but has shown some signs of stabilization and possibleimprovement toward the end of the third quarter. Consumers experienced high

levels of stress from higher unemployment and underemployment as well asfurther declines in home prices. These factors led to lower consumer spending,negatively impacting growth in the consumer loan portfolio including credit cardand real estate. Consumer net charge-offs in our credit card and real estateportfolios increased reflecting deterioration in the economy and housingmarkets particularly in geographic areas that have experienced the mostsignificant declines in home prices. The commercial portfolio declined as a resultof these factors combined with further reductions in spending by businesses andthe resurgence of capital markets which allowed corporate clients to issue bondsand equity to replace loans as a source of funding. Higher commercial net charge-offs were driven by commercial real estate, reflecting deterioration across variousproperty types, and the commercial domestic portfolio, reflecting broad-baseddeterioration in terms of borrowers and industries. In addition to increased netcharge-offs, nonperforming assets and commercial criticized utilized exposureswere higher which contributed to increased reserves across most portfoliosduring the nine months ended September 30, 2009. For more information oncredit quality, see the Credit Risk Management discussion beginning on page 159.

* * *

The above conditions, together with continued weakness in the overall economyand recent and proposed regulatory changes, will continue to affect many of themarkets in which we do business and may adversely impact our results for theremainder of 2009 and into 2010. However, we do not expect the impacts to be assignificant as those experienced in the first nine months of 2009. The degree ofthe impact is dependent upon the timing of the economic recovery.

52. On February 1, 2010, Bank of Americas General Counsel executed a documentstyled Final Consent Judgment as to Defendant Bank of America Corporation (the SEC


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Consent Judgment).3 The SEC Consent Judgment arose out of two complaints filed against the

Company by the SEC alleging that the Company violated section 14 of the Exchange Act and

Rules 14a-3 and 14a-9 thereunder, as a result of the Companys failure to disclose, in connection

with its proxy solicitation for the acquisition of Merrill Lynch, certain information concerning

Merrill Lynchs payment of year-end bonuses and its losses in the fourth quarter of 2008. As a

result of the SEC Consent Judgment, the Company agreed, inter alia, to certain revisions to its

internal controls relative to disclosures in publicly-filed financial and proxy statements, as well

as to pay a civil penalty in the amount of $150 million.

53. On February 26, 2010, Individual Defendants Moynihan, Bies, Boardman,Bramble, Colbert, Gifford, Holliday, Jones, Lozano, May, Powell, and Scully caused the

Company to file its 2009 Form 10-K with the SEC. In doing so, these defendants certified

and/or were responsible for discussing known trends, events or uncertainties reasonably likely to

have a material effect on the Companys results of operations or financial condition. The

following were among the Companys highlighted risks:

Our businesses and earnings have been, and may continue to be,negatively affected by adverse business and economic conditions. Ourbusinesses and earnings are affected by general business and economic conditions

in the United States and abroad. Given the concentration of our businessactivities in the United States, we are particularly exposed to downturns in theU.S. economy. For example, as a result of the challenging economic environmentthere continues to be a greater likelihood that an elevated number of ourcustomers or counterparties will become delinquent on their loans or otherobligations to us, which, in turn, may continue to result in a high level of charge-offs and provision for credit losses, all of which would adversely affect ourearnings and capital levels.

General business and economic conditions that could affect us include thelevel and volatility of short-term and long-term interest rates, inflation, homeprices, unemployment and under-employment levels, bankruptcies, householdincome, consumer spending, fluctuations in both debt and equity capital markets,

liquidity of the global financial markets, the availability and cost of credit,investor confidence, and the strength of the U.S. economy and the othereconomies in which we operate. The deterioration of any of these conditions canadversely affect our consumer and commercial businesses and securitiesportfolios, as well as our earnings.

3 The SEC Consent Judgment was entered in the actions styled Securities and ExchangeCommission v. Bank of America Corporation, 09 Civ. 6828 (JSR) and 10 Civ. 0215 (JSR)(S.D.N.Y.)


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***

Our increased credit risk could result in higher credit losses andreduced earnings. Current negative economic conditions are likely to continueto increase our credit exposure to third parties who may be more likely to defaulton their obligations to us. This increased credit risk could adversely affect ourconsumer credit card, home equity, consumer real estate and purchased impairedportfolios, among others, including causing increases in delinquencies and defaultrates, which we expect will continue to impact our charge-offs and provision forcredit losses.

***

Our ability to attract and retain customers and employees could beadversely affected to the extent our reputation is harmed. Our ability toattract and retain customers and employees could be adversely affected to theextent our reputation is damaged. Our actual or perceived failure to addressvarious issues could give rise to reputational risk that could cause harm to us andour business prospects, including failure to properly address operational risks.These issues also include, but are not limited to, legal and regulatory

requirements; privacy; properly maintaining customer and associate personalinformation; record keeping; money-laundering; sales and trading practices;ethical issues; appropriately addressing potential conflicts of interest; and theproper identification of the legal, reputational, credit, liquidity and market risksinherent in our products.

We are also facing enhanced public and regulatory scrutiny resulting fromthe financial crisis, including the U.S. Treasurys previous investment in ourpreferred stock, our acquisition of Merrill Lynch, modification of mortgages,volume of lending, compensation practices and the suitability of certain tradingand investment businesses. Failure to appropriately address any of these issuescould also give rise to additional regulatory restrictions, reputational harm andlegal risks, which could among other consequences increase the size and numberof litigation claims and damages asserted or subject us to enforcement actions,fines and penalties and cause us to incur related costs and expenses.

54. With regard to the enhanced public and regulatory scrutiny, the Companys2009 Form 10-K also disclosed that it faced an investigation by the Federal Trade Commission

(FTC) and that the Company received an FTC staff letter concerning the alleged improper loan

servicing practices of BAC Home Loans Servicing, LP, a settlement inquiry related thereto, and

a draft complaint and proposed consent order.

55. For the fourth quarter of 2009, the CompanysHome Loans & Insurance segmentrecorded a net loss of $945 million. Its full year net loss was nearly $3.9 billion, an increase of

50% over that recorded for 2008.

56. With respect to the Companys mortgage banking income, the 2009 Form 10-Knoted that the Company recorded an increase in representations and warranties expense to $1.9


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billion in 2009 from $246 million in 2008, driven by increased estimates of defaults reflecting

deterioration in the economy and housing markets combined with a higher rate of repurchase or

similar requests.

57. For 2009, non-performing residential mortgage loans rose to $16.6 billion, anincrease of 135% over the prior year. Residential mortgage loans past due by 90 days or more

rose to $11.68 billion, an increase of 3000% over the prior year. Non-perforrming residential

mortgage loans and residential mortgage loans past due by 90 days or more together represented

about 11.7% of the Companys $242 billion of outstanding residential mortgage loans.

58. The Companys residential mortgage loans categorized as non-performing rosefrom year-end 2008s $7.06 billion to $16.6 billion by year-end 2009, an increase of 135%. By

the end of 2010, non-performing residential mortgage loans rose to $17.7 billion. The

Companys home equity loans categorized as non-performing rose from 2008s $2.6 billion by

the end of 2008 to $3.8 billion by the close of 2009, an increase of nearly 50%.

59. The Companys accruing residential mortgage loans past due 90 days or morerose from year-end 2008s $372 million to $11.68 billion by the end of 2009an astounding

3000% increase. By year-end 2010, accruing residential mortgage loans past due 90 days or

more rose to $16.77 billion.

60. The Companys allowance for credit losses related to residential mortgage loansrose from year-end 2008s $964 million to $4.4 billion by the close of 2009, a 350% increase.

The Companys allowance for credit losses related to home equity loans rose from year-end

2008s $3.6 billion to $7.2 billion by year-end 2009, a 100% increase.

61. On May 7, 2010, Individual Defendants Gifford, May, Moynihan, Holliday, Bies,Bramble, Colbert, Jones, Lozano, Powell, Rossotti, Sully and Boardman caused the Company to

file to file its Form 10-Q for the quarter-ended March 31, 2010 with the SEC. For that quarter,

non-performing residential mortgage loans rose to $17.8 billion. Residential mortgage loans past

due by 90 days or more rose to $13.589 billion. Non-performing residential mortgage loans and

residential mortgage loans past due by 90 days or more together represented about 12.8% of the


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Companys $245 billion of outstanding residential mortgage loans. Provision for credit losses

associated with the Home Loan & Insurance business segment increased $228 million to $3.6

billion compared to the same period in 2009 due primarily to higher reserve additions amid

continued stress in the housing markets, the impact related to certain modified loans that were

written-down to the underlying collateral value and net charge-offs related to home equity.

Home Loans & Insurance recorded a net loss of $2.1 billion in the three months ended March 31,

2010 compared to a net loss of $494 million for the same period in 2009.

62. The MDA contained in the May 7, 2010 Form 10-Q explained, in part:Economic Environment

During the first quarter of 2010, credit quality improved as the economic recoverystrengthened and labor markets began to stabilize. Consumer spending picked up,both for retail sales and purchases of motor vehicles. Industrial production rose, asbusinesses ended their prolonged and dramatic inventory liquidation. Also,business investment on equipment and spending rose sharply. In this improvingeconomic environment most of our loan portfolios, from a credit qualityperspective, have either stabilized or improved during the three months endedMarch 31, 2010. Despite these encouraging signs of improvement, the levels ofspending and production remain below their expansion peaks, and the globaleconomic environment remains challenging. Most prominently,unemployment and underemployment levels are very elevated and householddebt levels are very high, businesses remain reticent to hire and the realestate markets remain stressed. Losses and criticized loan levels haveimproved, but remain elevated, and our nonperforming loans are stillincreasing, although at a slower pace. In addition, in response to the economicchallenges, both consumer and commercial customers continue to reduce debtresulting in a reduction in our loan levels which has negatively impacted netinterest income. The impact of continued de-leveraging, as well as charge-offs,will negatively impact our ability to grow loan balances.

Looking forward, the banking environment and many of the markets in which weconduct business will be influenced by the uneven and fragile global economic

recovery, potential for financial turmoil and recent and newly proposed financialreforms. The elevation of the European Union financial crisis may spread andadversely affect global and U.S. capital markets. In this uneasy environment,imposition of new U.S. and global financial regulations, particularly significantlyhigher capital and liquidity standards and additional fees, will directly affect thebanking industry, and may have adverse effects on the pace of economicrecovery.


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63. The Companys Form 10-Q filed on May 7, 2010 also disclosed that it hadentered into a consent order with the FTC, which ended the commissions investigation into loan

servicing practices by Countrywide and BAC Home Loans Servicing, LP. It stated, in part, as

follows:

On April 27, 2010, Countrywide Home Loans, Inc. (CHL) and BAC Home LoansServicing, LP reached an agreement in principle with the Federal TradeCommission (FTC) to resolve the FTCs investigation into CHLs and BACHome Loans Servicing, LPs servicing practices. The agreement is evidenced bya consent order under which CHL and BAC Home Loans Servicing, LP agreed,without admitting any wrongdoing, to settle the matter for an amount that is notmaterial to the Corporations consolidated financial statements. The amount waspaid to the FTC as equitable relief for consumers whose loans were serviced byCHL and Countrywide Home Loans Servicing, LP prior to their acquisition by theCorporation. The payment to the FTC is not a penalty or a fine. As part of the

settlement, CHL and BAC Home Loans Servicing, LP also agreed to a number ofadditional undertakings related to the servicing of residential mortgage loans thatare in payment default or under which the borrower is a debtor in a Chapter 13bankruptcy case.

As part of the settlement, Countrywide agreed to pay $108 million to the FTC, which was to be

refunded to homeowners who defaulted on their residential mortgage loans but who suffered

unjustified overcharges from Countrywide related to default loan services.

64. On August 6, 2010, Individual Defendants Gifford, May, Moynihan, Holliday,Bies, Bramble, Colbert, Jones, Lozano, Powell, Rossotti, Scully, and Boardman caused theCompany to file its Form 10-Q for the quarter-ended June 30, 2010. For that quarter, non-

performing residential mortgage loans rose to $18.3 billion. Residential mortgage loans past due

by 90 days or more rose to $15.337 billion. Non-performing residential mortgage loans and



associated with the Home Loan & Insurance business segment was approximately $2.4 billon,

and the net loss totaled $1.534 billionover twice the amount reported for the same period in

2009.

65. The MDA contained in the August 6, 2010 Form 10-Q explained, in part:Economic Environment


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During the second quarter of 2010, the U.S. economy continued its slow recoverywith modest increases in consumer spending and real Gross Domestic Product.Employment rose modestly, and the unemployment rate receded from its peak butremained elevated. Consumer spending on retail sales, motor vehicles andservices rose at a healthy pace early in the quarter, but momentum dissipatedtoward the end of the quarter. Industrial production rose as businesses recover

from the prolonged and dramatic inventory liquidation. Also, business investmenton equipment and spending rose sharply. In this improving economicenvironment most of our loan portfolios, from a credit quality perspective, haveeither stabilized or improved. Despite these encouraging signs of improvement,the levels of spending and production remain below their expansion peaks,and the national and global economic environment remains challenging.Most prominently, unemployment and underemployment levels are elevatedand household debt levels are high, businesses remain reticent to hire and thereal estate markets remain stressed. Losses and criticized loan levels haveimproved, but remain elevated, and our nonperforming loans remain elevatedbut are stabilizing. In addition, in response to the economic challenges, bothconsumer and commercial customers continue to reduce debt resulting in areduction in our loan levels which has negatively impacted net interest income.

The impact of continued de-leveraging, as well as charge-offs, will negativelyimpact our ability to grow loan balances.

Looking forward, the banking environment and many of the markets in which weconduct business will be influenced by the uneven and fragile global economicrecovery, the potential for financial turmoil and recent financial reforms includingthe Financial Reform Act. The European Union financial crisis may spread orworsen and adversely affect global and U.S. capital markets and undermine theconfidence of U.S. consumers and businesses. In this uneasy environment,imposition of new U.S. and global financial regulations, especially significantlyhigher capital and liquidity standards and additional fees, will directly affect thebanking industry, and may have adverse effects on the pace of economicrecovery.

66. On November 5, 2010, Individual Defendants Gifford, May, Moynihan, Holliday,Bies, Bramble, Colbert, Jones, Lozano, Powell, Rossotti, Scully, and Boardman caused the

Company to file its Form 10-Q for the quarter ended September 30, 2010. For that quarter, non-

performing residential mortgage loans were $18.3 billion. Residential mortgage loans past due

by 90 days or more rose to $16.427 billion. Non-performing residential mortgage loans and



associated with theHome Loan & Insurance business segment was $1.3 billion; the net loss was

$344 million.

67. The MDA contained in the November 5, 2010 Form 10-Q explained, in part:Economic and Business Environment


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The national and global economic environment remains challenging. Mostprominently, unemployment levels remain high along with household debtlevels, businesses remain reticent to hire and the consumer and commercialreal estate markets remain stressed. Nevertheless, during the third quarter of2010, the U.S. economy continued its recovery, with modest increases inconsumer spending and real Gross Domestic Product. Employment rose modestly,

but the unemployment rate remained high. Consumer spending on retail sales,motor vehicles and services rose moderately, and businesses increased productionto meet demand but did not add materially to inventories. Business investment inequipment and software continued to rise rapidly, but investment in structurescontinued to decline. Households are saving more and continue to pay down debt,while businesses remain very cautious and hold record levels of cash. This willresult in additional pressure on our loan levels which negatively affects netinterest income. In this current economic environment, credit quality hasimproved over the past several quarters as losses and criticized loan levels havedeclined and our nonperforming loans are stabilizing. To the extent there iscontinued de-leveraging and businesses utilize operating cash, these factors willnegatively impact our ability to grow loan balances.

Looking forward, the banking environment and many of the markets in which weconduct business will be influenced by the uneven and fragile global economicrecovery and recent financial reforms including the Financial Reform Act. Marketexpectations that the Federal Reserve will resort to more quantitative easing hasflattened the yield curve and depressed the U.S. dollar exchange rate. TheEuropean Union financial crisis may spread or worsen and adversely affect globaland U.S. capital markets and undermine the confidence of U.S. consumers andbusinesses. In this uncertain economic environment, imposition of new U.S. andglobal financial regulations, especially significantly higher capital and liquiditystandards and additional fees, will directly affect the banking industry, and mayadversely affect our earnings.

68. The November 5, 2010 MDA also specifically discussed the Companysforeclosure processes:

Review of Foreclosure Processes

On October 1, 2010, we voluntarily stopped taking foreclosure proceedings tojudgment in states where foreclosure requires a court order following a legalproceeding. On October 8, 2010, we stopped foreclosure sales in all states inorder to complete an assessment of the related business processes. Theseactions did not affect the initiation and processing of foreclosures prior to judgment or sale of real estate owned properties. We took these precautionarysteps in order to ensure our processes for handling foreclosures include theappropriate controls and quality assurance. Our review involves an assessment of

the foreclosure process, including a review of completed foreclosure affidavits inpending proceedings.

We recently announced that we had completed our assessment of our foreclosureaffidavit process in the 23 states where foreclosure requires a court orderfollowing a legal proceeding. As a result of that review, we have identified andare implementing process and control enhancements to ensure that affidavitsare prepared in compliance with state law and have begun a rolling processof preparing and resubmitting, as necessary, affidavits of indebtedness inpending foreclosure proceedings in order to resume the process of taking


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these foreclosure proceedings to judgment in these states. We estimate thisprocess of resubmitting affidavits will take at least several weeks and couldinvolve as many as 102,000 foreclosure proceedings that were pending as ofOctober 1, 2010. Once these affidavits are resubmitted, there may be prolongedadversary proceedings that delay certain foreclosure sales. We continue to assessour processes in the other 27 states and intend to implement enhancements as

appropriate.Subsequent to our announcements that we were temporarily suspendingforeclosure sales, law enforcement authorities in all 50 states and the UnitedStates Department of Justice and other federal agencies have stated they areinvestigating whether mortgage servicers have had irregularities in theirforeclosure practices. Those investigations, as well as any other governmentalor regulatory scrutiny of our foreclosure processes, could result in fines,penalties or other equitable remedies and result in significant legal costs inresponding to governmental investigations and possible litigation.

While we cannot predict the ultimate impact of the temporary delay in foreclosuresales, or any issues that may arise as a result of alleged irregularities with respectto previously completed foreclosure activities, we may be subject to

additional borrower and non-borrower litigation and governmental andregulatory scrutiny related to our past and current foreclosure activities.This scrutiny may extend beyond our pending foreclosure matters to issuesarising out of alleged irregularities with respect to previously completedforeclosure activities. We expect that our costs will increase in the fourthquarter of 2010 and will continue into 2011 as a result of the additionalresources necessary to perform the foreclosure process assessment, reviseaffidavit filings and make any other operational changes, which will likelyresult in higher noninterest expense, including higher servicing costs and legalexpenses, in the Home Loans & Insurancebusiness segment. In addition,process changes required as a result of our assessment could increase our defaultservicing costs over the longer term. Finally, the time to complete foreclosuresales may increase temporarily, which may result in an increase innonperforming loans and servicing advances and may impact thecollectability of such advances and the value of our mortgage servicing rightsasset. Accordingly, delays in foreclosure sales, including any delays beyond thosecurrently anticipated, our process enhancements and any issues that may arise outof alleged irregularities in our foreclosure processes could increase the costsassociated with our mortgage operations.

69. On February 25, 2011, Individual Defendants Gifford, May, Moynihan, Holliday,Bies, Bramble, Colbert, Jones, Lozano, Powell, Rossotti, Scully, and Boardman caused the

Company to file its Form 10-K for the year ended December 31, 2010. In doing so, these

defendants certified and/or were responsible for discussing known trends, events or uncertainties

reasonably likely to have a material effect on the Companys results of operations or financial

condition. For that year, non-performing residential mortgage loans were $17.7 billion.

Residential mortgage loans past due by 90 days or more rose to $16.77 billion. Non-performing


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residential mortgage loans and residential mortgage loans past due by 90 days or more together

represented about 13.4% of the Companys $257 billion of outstanding residential mortgage

loans. For the fourth quarter of 2010, the Companys Home Loans & Insurance segment

recorded a net loss of $4.9 billionover four times that reported during the same period in 2009.

Its full year net loss was over $8.9 billion, which was more than twice the loss reported for 2009.

70. The Companys 2010 Form 10-K shows that these defendants were quite aware ofthe risks presented by Bank of Americas wobbling residential mortgage loan business, and the

subsequent foreseeable impacts on its default loan management, which gave rise to a known duty

on their part to take proactive steps address such risks. By way of example only, the section of

the 2010 Form 10-K entitled Item 1A. Risk Factors at page 8 states, in part:Our businesses and results of operations have been, and may continue

to be, materially and adversely affected by the U.S. and internationalfinancial markets and economic conditions generally.

***

The sustained high unemployment rate and the lengthy duration ofunemployment have directly impaired consumer finances and pose risks to thefinancial services sector. The housing market remains weak and the elevatedlevels of distressed and delinquent mortgages add a significant degree of risk tothe mortgage market, in addition to risks inherent to the business of banking. Therisks related to the distressed mortgage market may be accentuated by attempts to

forestall foreclosure proceedings, as well as state and federal investigations intoforeclosure practices throughout the financial services industry. These factorsmay adversely affect credit quality, bank lending and the general financialservices sector.

71. At pages 10-11, the Companys 2010 Form 10-K states, in part:We temporarily suspended our foreclosure sales nationally in the

fourth quarter of 2010 to conduct an assessment of our foreclosure processes.Subsequently, numerous state and federal investigations of foreclosureprocesses across our industry have been initiated. Those investigations andany irregularities that might be found in our foreclosure processes, along

with any remedial steps taken in response to governmental investigations orto our own internal assessment, could have a material adverse effect on ourfinancial condition and results of operations.

***

While we cannot predict the ultimate impact of the temporary delay inforeclosure sales, or any issues that may arise as a result of alleged irregularitieswith respect to previously completed foreclosure activities, we may be subject toadditional borrower and non-borrower litigation and governmental and regulatoryscrutiny related to our past and current foreclosure activities. This scrutiny may


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extend beyond our pending foreclosure matters to issues arising out of allegedirregularities with respect to previously completed foreclosure activities. Ourcosts increased in the fourth quarter of 2010 due to the additional resourcesnecessary to perform the foreclosure process assessment, to revise affidavit filingsand to implement other operational changes. This will likely result in highernoninterest expenses, in Home Loans & Insurance. It is also possible that the

temporary suspension of foreclosure sales may result in additional costs andexpenses, including costs associated with the maintenance of properties orpossible home price declines, while foreclosures are delayed. In addition,required process changes could increase our default servicing costs over thelonger term. Finally, the time to complete foreclosure sales may increasetemporarily, which may result in an increase in non-performing loans andservicing advances and may impact the collectability of such advances and thevalue of our MSRs, MBS and real estate owned properties. An increase in thetime to complete foreclosure sales also may inflate the amount of highlydelinquent loans in the Corporations mortgage statistics, result in increasinglevels of consumer nonperforming loans, and could have a dampening effect onnet interest margin as non-performing assets rise. Accordingly, delays inforeclosure sales, including any delays beyond those currently anticipated, and

our continued process enhancements and any issues that may arise out of allegedirregularities in our foreclosure process could increase the costs associated withour mortgage operations.

B. Consumer Complaints About the Companys Residential Mortgage Loan Servicing.

72. Bank of Americas mortgage loan modification processes and foreclosures havelong been the subject of homeowners complaints. Many of these complaints have echoed the

same themes articulated by government regulatorse.g., lack of responsiveness to consumer

inquiries about residential mortgage loan modifications; advice to troubled borrowers that they

needed to default before the Company could assist them with modifications; submission of

adverse credit reports to credit agencies with respect to troubled borrowers who were making

payments pursuant to modifications; pyramiding of fees; demonstrated unwillingness and/or

inability to work in good faith with consumers who are ready, willing, able and qualified to

receive such a loan modification; and its problematic foreclosure procedures.

73. Excerpts from a number of homeowner complaints posted on internet sites (e.g.,consumeraffairs.com) illustrate the inadequacy of Bank of Americas infrastructure to deal with

troubled loans:

a. Our mortgage company, Wiltshire, sold our mortgage to Bank of Americalast year. We had no notice that BOA had taken over our mortgage until wereceived a phone call in January 2011 from someone giving us a new accountnumber and stating that we would get a statement in the mail.


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A few days later, we received a notice that our loan was in default. We had nevermissed a payment but we thought it may be related to the fact that we had beensending payments to Wiltshire and not BOA so they were arriving late as I couldsee on the statement that payments were being received. We corrected the onlinepayment and figured it would self correct.

In February, we again showed as past due and that was when I realized there wasan escrow on the account, which we had never had with Wiltshire. More researchshowed that they had placed lender financed homeowners insurance. Iimmediately called and was told where to fax our homeowners insurance. Nowmind you, this is February 2011. I had our insurance company fax the informationand figured that was that.

March comes and again we are past due. I again call and this time am told thatthere was a lapse in coverage in July 2010. Seriously? And no one tells us? Andyou wait til January to put an escrow in place? So, I contact our homeownersinsurance who states that there was a lapse (had no idea..good thing our house

didnt burn down).

BOA states that we need to send them $141.98 for the coverage they provided (15days worth) in order to bring the account current. We could argue and fight, butfigure, fine...so I send the $141.98 WITH the statement from BOA that says whywe are sending and for what.

So...for the past month, I have been getting six phone calls a day from BOA.Then, on Tuesday, we get a check in the mail for $212.50...a REFUND FORESCROW THAT WE NEVER HAD...and our payment STILL SHOWS PASTDUE!!!

So...today I talk to Ed. He claims they applied my $141.98 that was for insuranceto LATE CHARGES! Late charges THEY caused!!! Unfortunately, poor Ed gotthe brunt of my wrath and he FINALLY says he got it straight...BUT...

They have sent us a check for $1100..the amount of the payment we sent in Aprilbecause it was less than agreed. Are you KIDDING ME???? So, we have towait for the $1100 check to arrive and then we send that and the $212.50 BACKto BOA where Ed has applied the $141.98 as a payment...and then he says But itneeds to be back by the 1st to avoid lateness being reported to credit bureaus.

In reading these posts, it appears that as of January 2011, BOA has suddenlytaken to adding Escrows whenever they choose. We are taking steps to pay our

mortgage early because we no longer want to deal with these idiots!

Terry of Lincoln, DE April 22, 2011

b. We were offered a modification in 2008 because Bank of America tookover our home loan from Countrywide. I have had to resubmit paperwork 6 timesand have been advised that they received my paperwork but everytime someonenew would take over our file I was told they were missing documents. I would getanother packet in the mail, resubmit and the same thing for 3 years. In 2010 I paid


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our taxes and HO insurance as we have for years because we never had anescrow. In January (3 years after we started the modification process) we receiveda statement BOA that indicated the increase in our payments due to an escrowshortage with our mortgage payments and so our payments were going from 2197to 3777. I have talked to about 20 people since then and no one could give me a

straight answer. They were telling me my loan was in underwriting. I said shouldI just cancel the request to modify they said no, it should be very soon. So I stayedon board in hopes that we might get a little help if nothing else. I workedconstantly trying to get someone to help us. I found out from one of the LoanModification personnel that I was declined for the modification in January, butdid not receive notice until March.

That the Real Estate Taxes they paid for $4,200 were refunded to them onDecember 23, 2010 and we figured out that BOA was still including those moniesin this escrow they started in 2011. We also found out through one of their teammembers who casually said well I see you were declined in January they knew Iwasnt going to get the modification in January they went ahead with the escrow

and were charging us for the escrow they paid in 2010 (but was returned to themin December) and in addition, they were charging for what our normal escrowwould be every month moving forward. So taxes and insurance would be around$520 a month, so they doubled that for the money they paid out in 2010 andcharged us again for future escrow payments. On top of that because the mortgagepayments they expected us to pay were 3777 I advised them we could not pay thatamount. We were still paying our regular payment which they were accepting, butwhen I made my next months payment, they took a portion of that payment tocover the difference for the 3777 payment so they are now saying all of ourpayments are late and have put us on notice of being in default on our loan. Iattempted to get in touch with Matt in the escrow department who was helping

sort out the escrow mess CAUSED BY BOA and now every time I call they willnot put me through to him to help me finally resolve these issues.

I made 7 phone calls on Thursday 4/14/11 which is when I told Matt I would callhim back because I needed to speak to my husband and no one would put methrough to the extension I had reached him at before. Plus I got dropped aboutanother 4 times from transfers other employees did. The letter said I needed torespond by April 18, 2011, so now today I am searching for a lawyer to help us.We did not ask for this, all we did fill out paperwork for a modification that theyoffered to us -- we did not request. I want to know why we were not notified thatthey were refunded the money they put out for our real estate taxes and continued

to charge us for that payment in our escrow and why our mortgage was notadjusted to reflect the refund. I believe there is a level of fraudulent activities onbehalf of Bank of America and from what I see in your list of complaints I amnow the only one. Cant someone do something to stop them from these practicesso this doesnt happen to anyone else. Who can we call at Bank of America -- tofind a complaint line or hotline is impossible in that website and no one in theoffices seems to want to help -- Does bank of america have that much money thatthey can afford to close on hardworking homeowners who have been diligent in


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paying their mortgage for years, paying their own insurance and taxes for years,and now are attempting to take away what you have worked so hard for yourwhole life for.

Deborah of Orlando, FL April 15, 2011

c. 3/ 2010 i was approved for the loan mod. program with BofA since thenthey have lost paperwork repeatedly. I have had to requalify 4 or 5 times since3/2010. I have mailed & faxed modification paperwork more times than I cancount. I check back every couple of weeks and each time they tell me my case isunder review, someone will contact you The only time I have been contactedwas to say I was in foreclosure. When I call, no one at bofa has any idea what isgoing on with my loan.

The ask me to requalify or resend docs, or send updated docs which I always doimmediately. This last time, I had to start the whole process over in Feb becausethey had misplaced my file. After I was approved (again) and spending 30

minutes on the phone giving financials, they told me they would send a modifypacket. I had to call 4 times before I finally received it. I mailed it in. After nothearing from them for 2 weeks I called. They did not have my docs. They told meto fax it. I did. twice. I spoke to evelyn, she assured me the docs were in and beingreviewed. Since then I have checked in and spoken to numerous people whoassured me I was under review. 3/10 I called to check, Reginald said they neededupdated docs before they could go forward!! I immediately faxed the docs andcalled. Reginald assured me they were received. Today I called to check on thestatus & they told me they had nothing & I had to requalify again--to start allover! it has been over a year!

jennifer of las vegas, NV March 25, 2011

d. I notified B of A last June after the local oil spill that work had sloweddown.Normally bringing in around $5000.00 a month, because of the BP oil spillthe month of June was down to $347.00 for the month.I called B of A the first ofJune and they said they would send loan mod. papers. By the end of June, nopapers. First of July I called them back. They stated they were behind onpaperwork and I should get them soon.End of July,no paperwork.

I maintained paying my mortgage payments on time. I continued to call about theloan modification papers and was always transfered from one department toanother. I was a told over the phone that I could not get a modification being

current with my mortgage. I remained current with my mortgage until Sept.2010.I filed a claim with BP for loss of income. More run around. Finally duringThanksgiving week, I received a payment from BP for $6100.00. The claim wasfor a loss of $15,000.00 f

Documents

06-17-2011 COMPLAINT - Gastineau vs. Banksters of America fka Bank of America