Capital One 2006 Annual Report Download - page 118

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100
Mortgage Servicing Rights: 2006
Balance, Beginning of Period $ 
Acquired in Acquisitions 252,353
Originations 8,756
Amortization (8,644)
Sales (170)
Balance at End of Year $ 252,295
Fair Value at December 31 $ 267,482
Ratio of Mortgage Servicing Rights to Related Loans Serviced for Others 0.92%
Weighted Average Service Fee 0.28
The significant assumptions used in estimating the fair value of the servicing assets at December 31, 2006 were as follows:
2006
Weighted average prepayment rate (includes default rate) 28.89%
Weighted average life (in years) 3.4
Discount rate 10.50%
At December 31, 2006, the sensitivities to immediate 10% and 20% increases in the weighted average prepayment rates
would decrease the fair value of mortgage servicing rights by $12.5 million and $23.6 million, respectively.
The following table summarizes our estimate of amortization of MSRs for the five-year period ending December 31, 2011.
This projection was developed using the assumptions made by management in its December 31, 2006, valuation of MSRs.
The assumptions underlying the following estimate will be affected as market conditions and portfolio composition and
behavior change, causing both actual and projected amortization levels to change over time. Therefore, the following
estimates will change in a manner and amount not presently determinable by management.
Estimated
Amortization
Year Ended December 31,
2007 $ 71,529
2008 44,823
2009 30,736
2010 22,392
2011 16,804
Five year total 186,284
Thereafter 66,011
Total $ 252,295
As of December 31, 2006, the Companys mortgage loan servicing portfolio consisted of mortgage loans with an aggregate
unpaid principal balance of $56.1 billion, of which $33.1 billion was serviced for investors other than the Company.
Note 19
Regulatory Matters
The Company and the Bank are subject to capital adequacy guidelines adopted by the Federal Reserve Board (the Federal
Reserve), the Savings Bank is subject to capital adequacy guidelines adopted by the Office of Thrift Supervision (the
OTS), CONA and Superior are subject to capital adequacy guidelines adopted by the Office of the Comptroller of the
Currency (the OCC), and North Fork Bank is subject to capital adequacy guidelines adopted by the Federal Deposit
Insurance Corporation (the FDIC) (collectively the regulators). The capital adequacy guidelines require the Company,
the Bank, the Savings Bank, CONA, Superior and North Fork Bank to maintain specific capital levels based upon
quantitative measures of their assets, liabilities and off-balance sheet items. In addition, the Bank, Savings Bank, CONA,
Superior and North Fork Bank must also adhere to the regulatory framework for prompt corrective action.
The most recent notifications received from the regulators categorized the Bank, the Savings Bank, CONA, Superior and
North Fork Bank as well-capitalized. As of December 31, 2006, the Companys, the Banks, the Savings Banks, CONAs,
Superiors and North Fork Banks capital exceeded all minimum regulatory requirements to which they were subject, and
there were no conditions or events since the notifications discussed above that management believes would have changed the
Companys, the Banks, the Savings Banks, CONAs, Superiors or North Fork Banks capital category.