Capital One 2012 Annual Report Download - page 273

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
of the mortgage loans, but mortgage loan performance often influences whether a claim for breach of
representation and warranty will be asserted and has an effect on the amount of any loss in the event of a breach
of a representation or warranty.
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.
The following table 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, 2012 and 2011:
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) 2012 2011 Total 2008 2007 2006 2005
Government sponsored enterprises (“GSEs”)(1) ...... $4 $5 $11 $1 $4 $3 $3
Insured Securitizations ......................... 56 20 0 2 8 10
Uninsured Securitizations and Other .............. 23 30 80 3 15 30 32
Total ....................................... $32 $41 $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 $20 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 $16 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 $4 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.
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