Capital One 2012 Annual Report Download - page 217

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(1) Represents the gross assets and liabilities owned by the VIE, which includes seller’s interest and retained and repurchased notes held by
other related parties.
(2) The carrying amount of assets of unconsolidated securitization-related VIEs consists of retained interests and letters of credit related to
manufactured housing securitizations and are reported on our consolidated balance sheets under accounts receivable from securitizations.
(3) The carrying amount of liabilities of securitization-related VIEs is comprised of obligations to fund negative amortization bonds
associated with the securitization of option-adjustable rate mortgage loans (“option-ARMs”) and obligations on certain swap agreements
associated with the securitization of manufactured housing loans.
(4) The maximum exposure to loss represents the amount of loss we would incur in the unlikely event that all of our assets in the VIE
become worthless and we were required to meet our maximum remaining funding obligations.
Securitization-related VIEs
We historically have securitized credit card loans, auto loans, home loans and installment loans. In a securitization
transaction, assets from our balance sheet are transferred to a trust we establish, which typically meets the definition
of a VIE. The trust then issues various forms of interests in those assets to investors. We typically receive cash
proceeds and/or other interests in the securitization trust for the assets we transfer. If the transfer of the assets to an
unconsolidated securitization trust qualifies as a sale, we remove the assets from our consolidated balance sheet and
recognize a gain or loss on the transfer. Alternatively, if the transfer does not qualify as a sale but instead is
considered a secured borrowing or the transfer of assets is to a consolidated VIE, the assets remain on our
consolidated balance sheets and we record an offsetting liability for the proceeds received.
Our continuing involvement in the majority of our securitization transactions consists primarily of holding
certain retained interests and acting as the primary servicer. We also may be required to repurchase receivables
from the trust if the outstanding balance of the receivables falls to a level where the cost exceeds the benefits of
servicing such receivables. We also may have exposure associated with contractual obligations to repurchase
previously transferred loans due to breaches of representations and warranties. See “Note 21—Commitments,
Contingencies and Guarantees” for information related to reserves we have established for our potential
mortgage representation and warranty exposure.
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