Capital One 2012 Annual Report Download - page 274

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 $80 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
databases that about $49 billion original principal balance of these mortgage loans are currently held by private-
label publicly issued securitizations not supported by bond insurance (“Uninsured Securitizations”). In contrast with
the bond insurers in Insured Securitizations, investors in Uninsured Securitizations often face a number of legal and
logistical hurdles before they can force a securitization trustee to pursue mortgage repurchases, including the need
to coordinate with a certain percentage of investors holding the securities and to indemnify the trustee for any
litigation it undertakes. Despite these legal and logistical hurdles, there is a risk that securitization trustees will
pursue mortgage repurchase litigation unilaterally or in coordination with investors. There is also a risk that
investors will be able to successfully pursue repurchase litigation independently and without the involvement of the
trustee as a party. An additional approximately $21 billion original principal balance of mortgage loans were
initially sold to private investors as whole loans. Of this amount, we believe approximately $10 billion original
principal balance of mortgage loans were ultimately purchased by GSEs. For purposes of our reserves-setting
process, we consider these loans to be private-label loans rather than GSE loans. Various known and unknown
investors purchased the remaining $10 billion original principal balance of mortgage loans in this category.
With respect to the $111 billion in original principal balance of mortgage loans originated and sold to others
between 2005 and 2008, we estimate that approximately $32 billion in unpaid principal balance remains
outstanding as of December 31, 2012, approximately $17 billion in losses have been realized and approximately
$8 billion in unpaid principal balance is at least 90 days delinquent. Because we do not service most of the loans
we sold to others, we do not have complete information about the underlying credit performance levels for some
of these mortgage loans. These amounts reflect our best estimates, including extrapolations where necessary.
These extrapolations occur on the approximately $10 billion original principal balance of mortgage loans for
which we do not have complete information about the current holders or the underlying credit performance.
These estimates could change as we get additional data or refine our analysis.
The subsidiaries had open repurchase requests relating to approximately $2.4 billion original principal balance of
mortgage loans as of December 31, 2012, compared with $2.1 billion as of December 31, 2011. As of
December 31, 2012, the majority of new repurchase demands received over the last year and, as discussed below,
the majority of our $899 million reserve relates to the $27 billion of original principal balance of mortgage loans
originally sold to the GSEs or to Active Insured Securitizations. Currently, repurchase demands predominantly
relate to the 2006 and 2007 vintages. We have received relatively few repurchase demands from the 2008 and
2009 vintages, mostly because GreenPoint ceased originating mortgages in August 2007.
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