Capital One 2011 Annual Report Download - page 117

Currently, we generally originate residential mortgage and home equity loans in our retail branch footprint
through our branches, dedicated home loan officers and direct marketing. Our home loan products include
conforming and non-conforming fixed rate and adjustable rate mortgage loans, as well as first and second
lien home equity loans and lines of credit. Our underwriting standards for conforming loans are designed to
meet the underwriting standards required by Fannie Mae, Freddie Mac or FHA/VA (the “agencies”) at a
minimum, and we sell most of our conforming loans to the agencies. We generally retain non-conforming
mortgages and home equity loans and lines of credit. We currently restrict non-conforming loans to
properties within our retail branch footprint. Our underwriting policy limits for these loans include (1) a
maximum loan-to-value ratio of 80% for loans without mortgage insurance; (2) a maximum loan-to-value
ratio of 95% for loans with mortgage insurance or for home equity products; (3) a maximum debt-to-income
ratio of 50%; and (4) a maximum loan amount of $2.5 million. Our underwriting procedures are intended to
verify the income of applicants and obtain appraisals to determine home values. We may, in limited
instances, use automated valuation models to determine home values.
•Commercial loans. We offer a range of commercial lending products, including loans secured by
commercial real estate and loans to middle market industrial and service companies. Our commercial loans
may have a fixed or variable interest rate; however, the majority of our commercial loans have variable
rates. Our underwriting standards require an analysis of the borrower’s financial condition and prospects, as
well as an assessment of the industry in which the borrower operates. Where relevant, we evaluate and
appraise underlying collateral and guarantees. We maintain underwriting guidelines and limits for major
types of borrowers and loan products that specify, where applicable, guidelines for debt service coverage,
leverage, loan-to-value ratio and standard covenants and conditions. We assign a risk rating and establish a
monitoring schedule for loans based on the risk profile of the borrower, industry segment, source of
repayment, the underlying collateral and guarantees (if any) and current market conditions. Although we
generally retain commercial loans, we may syndicate large positions for risk mitigation purposes. In
addition, we have sold impaired commercial loans in the past and may do so in the future.
Total loans that we manage consist of held-for-investment loans recorded on our balance sheet and loans held in
our securitization trusts. Prior to our January 1, 2010 adoption of the new consolidation standards, a portion of
our managed loans were accounted for as off-balance sheet. Loans underlying our securitization trusts are now
reported on our consolidated balance sheets in restricted loans for securitization investors. Table 19 presents the
composition of our total loan portfolio, by business segments, as of December 31, 2011 and 2010.
97