Capital One 2011 Annual Report Download - page 101

Each of these subsidiaries may be required to repurchase mortgage loans in the event of certain breaches of these
representations and warranties. In the event of a repurchase, the subsidiary is typically required to pay the then
unpaid principal balance of the loan together with interest and certain expenses (including, in certain cases, legal
costs incurred by the purchaser and/or others). The subsidiary then recovers the loan or, if the loan has been
foreclosed, the underlying collateral. The subsidiary is exposed to any losses on the repurchased loans after
giving effect to any recoveries on the collateral. In some instances, rather than repurchase the loans, a subsidiary
may agree to make a cash payment to make an investor whole on losses or to settle repurchase claims. In
addition, our subsidiaries may be required to indemnify certain purchasers and others against losses they incur as
a result of certain breaches of representations and warranties. In some cases, the amount of such losses could
exceed the repurchase amount of the related loans.
These subsidiaries, in total, originated and sold to non-affiliates approximately $111 billion original principal
balance of mortgage loans between 2005 and 2008, which are the years (or “vintages”) with respect to which our
subsidiaries have received the vast majority of the repurchase requests and other related claims.
Table 13 presents the original principal balance of mortgage loan originations, by vintage for 2005 through 2008
for the three general categories of purchasers of mortgage loans and the outstanding principal balance as of
December 31, 2011 and 2010:
Table 13: Unpaid Principal Balance of Mortgage Loans Originated and Sold to Third Parties Based on Category of
Purchaser
Unpaid Principal Balance
December 31, Original Unpaid Principal Balance
(Dollars in billions) 2011 2010 Total 2008 2007 2006 2005
Government sponsored enterprises
(“GSEs”)(1) ....................... $5 $5 $11 $ 1 $4 $3 $3
Insured Securitizations ................ 67 19— 289
Uninsured Securitizations and Other ..... 30 33 81 3 15 30 33
Total .............................. $41 $45 $111 $ 4 $21 $41 $45
(1) GSEs include Fannie Mae and Freddie Mac.
Between 2005 and 2008, our subsidiaries sold an aggregate amount of $11 billion in original principal balance
mortgage loans to the GSEs.
Of the $19 billion in original principal balance of mortgage loans sold directly by our subsidiaries to private-label
purchasers who placed the loans into securitizations supported by bond insurance (“Insured Securitizations”),
approximately $13 billion original principal balance was placed in securitizations as to which the monoline bond
insurers have made repurchase requests or loan file requests to one of our subsidiaries (“Active Insured
Securitizations”), and the remaining approximately $6 billion original principal balance was placed in
securitizations as to which the monoline bond insurers have not made repurchase requests or loan file requests to
one of our subsidiaries (“Inactive Insured Securitizations”). Insured Securitizations often allow the monoline
bond insurer to act independently of the investors. Bond insurers typically have indemnity agreements directly
with both the mortgage originators and the securitizers, and they often have super-majority rights within the trust
documentation that allow them to direct trustees to pursue mortgage repurchase requests without coordination
with other investors.
Because we do not service most of the loans our subsidiaries sold to others, we do not have complete information
about the current ownership of the $81 billion in original principal balance of mortgage loans not sold directly to
GSEs or placed in Insured Securitizations. We have determined based on information obtained from third-party
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