Capital One 2011 Annual Report Download - page 269

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED STATEMENTS—(Continued)
of loans in the portfolio, or, alternatively, the repurchase of specific mortgage loans to which the alleged breaches
of representations and warranties relate. On March 3, 2010, the Court granted GreenPoint’s motion to dismiss
with respect to plaintiffs Syncora and CIFG and denied the motion with respect to U.S. Bank. In March 2010,
GreenPoint answered the complaint with respect to U.S. Bank, denying the allegations, and filed a counterclaim
against U.S. Bank alleging breach of covenant of good faith and fair dealing. In April 2010, plaintiffs U.S. Bank,
Syncora, and CIFG filed an amended complaint seeking, among other things, the repurchase remedies described
above and indemnification for losses suffered by Syncora and CIFG. GreenPoint filed a motion to dismiss the
amended complaint. In January 2011, the Court instructed plaintiffs to seek leave of court to file an amended
complaint supported by an evidentiary showing of merit. Plaintiffs filed their motion for leave in June 2011,
GreenPoint opposed the motion, and the court heard arguments on the motion in January 2012. As noted above,
GreenPoint has established reserves with respect to its probable and reasonably estimable legal liability from the
U.S. Bank Lawsuit, which reserves are included within the overall representation and warranty reserve. Also as
noted above, GreenPoint has exposure to loss in excess of the amount established within the overall
representation and warranty reserve because GreenPoint has not established reserves with respect to the
portfolio-wide repurchase claim on the basis that the claim is not considered probable and reasonably estimable.
In the event GreenPoint is obligated to repurchase all 30,000 mortgage loans under the portfolio-wide repurchase
claim, GreenPoint would incur the current and future economic losses inherent in the portfolio. With respect to
the mortgage loan portfolio at issue in the U.S. Bank Litigation, we believe approximately $849 million of losses
have been realized and approximately $297 million in mortgage loans are still outstanding, of which
approximately $37 million are more than 90 days delinquent, including foreclosures and REO.
In September 2010, DB Structured Products, Inc. (“DBSP”) named GreenPoint in a third-party complaint, filed
in the New York County Supreme Court, alleging breach of contract and seeking indemnification (the “DBSP
Litigation”). In the underlying suit, Assured Guaranty Municipal Corp. (“AGM”) sued DBSP for alleged
breaches of representations and warranties made by DBSP with respect to certain residential mortgage loans that
collateralize a securitization insured by AGM and sponsored by DBSP (the “Underlying Lawsuit”). DBSP
purchased the HELOC loans from GreenPoint in 2006. The entire securitization is comprised of about 6,200
mortgage loans with an aggregate original principal balance of approximately $353 million. DBSP asserts that
any liability it faces lies with GreenPoint, alleging that DBSP’s representations and warranties to AGM are
substantially similar to the representations and warranties made by GreenPoint to DBSP. GreenPoint filed a
motion to dismiss the complaint in October 2010, which the court denied on July 25, 2011. The parties are
currently engaged in discovery. As noted above, GreenPoint has established reserves with respect to its estimated
probable and reasonable estimable legal liability from the DBSP Litigation, which reserves are included within
the overall representation and warranty reserve. Also as noted above, GreenPoint has not established a reserve
with respect to any portfolio-wide repurchase claim, but in the event GreenPoint is obligated to indemnify DBSP
for the repurchase of all 6,200 mortgage loans, GreenPoint would incur the current and future economic losses
inherent in the securitization. With respect to these loans, we believe approximately $148 million of losses have
been realized and approximately $47 million in mortgage loans are still outstanding, of which approximately $3
million are more than 90 days delinquent, including foreclosures and REO.
SEC Investigation
Since July 2009, we have been providing documents and information in response to an inquiry by the Staff of the
SEC. In the first quarter of 2010, the SEC issued a formal order of investigation with respect to this inquiry.
Although the order, as is generally customary, authorizes a broader inquiry by the Staff, we believe that the
investigation is focused largely on our method of determining the loan loss reserves for our auto finance business
for certain quarterly periods in 2007. We are cooperating fully with the Staff’s investigation.
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