Bank of America 2009 Annual Report Download - page 123

erty by reference to large volumes of market data including sales of
comparable properties and price trends specific to the MSA in which the
property being valued is located. The MRAC index is similar to the Case-
Schiller Home Index in that it is an index that is based on data from
repeat sales of single family homes and is reported on a lag.
Letter of Credit – A document issued on behalf of a customer to a third
party promising to pay the third party upon presentation of specified
documents. A letter of credit effectively substitutes the issuer’s credit for
that of the customer.
Making Home Affordable Program (MHA) – A U.S. Treasury program to
reduce the number of foreclosures and make it easier for homeowners to
refinance loans. The program is comprised of the Home Affordable Mod-
ification Program (HAMP) which provides guidelines on loan modifications
and is designed to help at-risk homeowners avoid foreclosure by reducing
monthly mortgage payments and provides incentives to lenders to modify
all eligible loans that fall under the program guidelines and the Home
Affordable Refinance Program (HARP) which is available to homeowners
who have a proven payment history on an existing mortgage owned by
FNMA or FHLMC and is designed to help eligible homeowners refinance
their mortgage loans to take advantage of current lower mortgage rates or
to refinance ARMs into more stable fixed-rate mortgages. In addition, the
Second Lien Program is a part of the MHA. For more information on this
program see the separate definition for the Second Lien Program.
Managed Basis – Managed basis assumes that securitized loans were
not sold and presents earnings on these loans in a manner similar to the
way loans that have not been sold (i.e., held loans) are presented. Non-
interest income, both on a held and managed basis, also includes the
impact of adjustments to the interest-only strip that are recorded in card
income.
Managed Net Losses – Represent net charge-offs on held loans com-
bined with realized credit losses associated with the securitized loan
portfolio.
Mortgage Servicing Right (MSR) – The right to service a mortgage loan
when the underlying loan is sold or securitized. Servicing includes collec-
tions for principal, interest and escrow payments from borrowers and
accounting for and remitting principal and interest payments to investors.
Net Interest Yield – Net interest income divided by average total interest-
earning assets.
Nonperforming Loans and Leases – Includes loans and leases that have
been placed on nonaccrual status, including nonaccruing loans whose
contractual terms have been restructured in a manner that grants a con-
cession to a borrower experiencing financial difficulties (troubled debt
restructurings or TDRs). Loans accounted for under the fair value option,
purchased impaired loans and loans held-for-sale are not reported as
nonperforming loans and leases. Past due consumer credit card loans,
consumer loans secured by personal property, unsecured consumer
loans, consumer loans secured by real estate where repayments are
insured by the Federal Housing Administration and business card loans
are not placed on nonaccrual status and are, therefore, not reported as
nonperforming loans and leases.
Option-adjusted Spread (OAS) – The spread that is added to the discount
rate so that the sum of the discounted cash flows equals the market
price, thus, it is a measure of the extra yield over the reference discount
factor (i.e., the forward swap curve) that a company is expected to earn
by holding the asset.
Primary Dealer Credit Facility (PDCF) – A facility announced on
March 16, 2008 by the Federal Reserve to provide discount window loans
to primary dealers that settle on the same business day and mature on
the following business day, in exchange for a specified range of eligible
collateral. The rate paid on the loan is the same as the primary credit rate
at the Federal Reserve Bank of New York. In addition, primary dealers are
subject to a frequency-based fee after they exceed 45 days of use. The
frequency-based fee is calculated on an escalating scale and communi-
cated to the primary dealers in advance. The PDCF was available to pri-
mary dealers until February 1, 2010.
Purchased Impaired Loan – A loan purchased as an individual loan, in a
portfolio of loans or in a business combination with evidence of deterio-
ration in credit quality since origination for which it is probable, upon
acquisition, that the investor will be unable to collect all contractually
required payments. These loans are written down to fair value at the
acquisition date.
Qualifying Special Purpose Entity (QSPE) – A SPE whose activities are
strictly limited to holding and servicing financial assets and which meets
the other criteria under applicable accounting guidance. A QSPE is gen-
erally not required to be consolidated by any party.
Return on Average Common Shareholders’ Equity – Measure of the earn-
ings contribution as a percentage of average common shareholders’
equity.
Second Lien Program (2MP) – A MHA program announced on April 28,
2009 by the U.S. Treasury that focuses on creating a comprehensive
affordability solution for homeowners. By focusing on shared efforts with
lenders to reduce second mortgage payments, pay-for-success incentives
for servicers, investors and borrowers, and a payment schedule for
extinguishing second mortgages, the 2MP is designed to help up to
1.5 million homeowners. The program is designed to ensure that first and
second lien holders are treated fairly and consistently with priority of
liens, and offers automatic modification of a second lien when a first lien
is modified. Details of the program are still being finalized as of the time
of this filing.
Securitize/Securitization – A process by which financial assets are sold
to a SPE, which then issues securities collateralized by those underlying
assets, and the return on the securities issued is based on the principal
and interest cash flow of the underlying assets.
Structured Investment Vehicle (SIV) – An entity that issues short dura-
tion debt and uses the proceeds from the issuance to purchase longer-
term fixed income securities.
Subprime Loans – Although a standard industry definition for subprime
loans (including subprime mortgage loans) does not exist, the Corporation
defines subprime loans as specific product offerings for higher risk bor-
rowers, including individuals with one or a combination of high credit risk
factors, such as low FICO scores (generally less than 620 for secured
products and 660 for unsecured products), high debt to income ratios
and inferior payment history.
Super Senior CDO Exposure – Represents the most senior class of
commercial paper or notes that are issued by CDO vehicles. These finan-
cial instruments benefit from the subordination of all other securities,
including AAA-rated securities, issued by CDO vehicles.
Treasury Temporary Guarantee Program for Money Market Funds
(TTGP) – A voluntary and temporary program announced on Sep-
tember 19, 2008 by the U.S. Treasury which provided for a guarantee to
investors that they would receive $1.00 for each money market fund
share held as of September 19, 2008 in the event that a participating
fund no longer had a $1.00 per share net asset value and liquidated.
With respect to such shares covered by this program, the guarantee
payment would have been equal to any shortfall between the amount
received by an investor in a liquidation and $1.00 per share. Eligible
money market mutual funds paid a fee to the U.S. Treasury to participate
in this program which expired on September 18, 2009.
Temporary Liquidity Guarantee Program (TLGP) – A program announced
on October 14, 2008 by the FDIC which is comprised of the Debt Guaran-
Bank of America 2009 121