GE 2013 Annual Report Download - page 89

GE 2013 ANNUAL REPORT 87
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The dismissal of a lawsuit subsequent to December 31, 2013
decreased the pending claims amount by $123 million and the
Litigation Claims amount by $318 million. These claims refl ect the
purchase price or unpaid principal balances of the loans at the
time of purchase and do not give effect to pay downs, accrued
interest or fees, or potential recoveries based upon the underly-
ing collateral. As noted above, WMC believes that the Litigation
Claims confl ict with the governing agreements and applicable
law. As a result, WMC has not included the Litigation Claims in
its pending claims or in its estimates of future loan repurchase
requests and holds no related reserve as of December 31, 2013.
At this point, WMC is unable to develop a meaningful esti-
mate of reasonably possible loss in connection with the Litigation
Claims described above due to a number of factors, including the
extent to which courts will agree with the theories supporting
the Litigation Claims. The case law on these issues is unsettled,
and while several courts have supported some of the theories
underlying WMC’s legal defenses, other courts have rejected
them. There are a number of pending cases, including WMC
cases, which, in the coming months, could provide more certainty
regarding the legal status of these claims. An adverse court deci-
sion on any of the theories supporting the Litigation Claims could
increase WMC’s exposure in some or all of the 14 lawsuits, result
in a reclassifi cation of some or all of the Litigation Claims to pend-
ing claims and provoke new claims and lawsuits on additional
loans. However, WMC continues to believe that it has defenses
to all the claims asserted in litigation, including, for example,
causation and materiality requirements, limitations on remedies
for breach of representations and warranties, and the appli-
cable statutes of limitations. To the extent WMC is required to
repurchase loans, WMC’s loss also would be affected by several
factors, including pay downs, accrued interest and fees, and the
value of the underlying collateral. It is not possible to predict the
outcome or impact of these defenses and other factors, any one
of which could materially affect the amount of any loss ultimately
incurred by WMC on these claims.
WMC has received claims on approximately $2,200 million
of mortgage loans after the expiration of the statute of limita-
tions as of December 31, 2013, $1,700 million of which are also
included as Litigation Claims. WMC has also received unspeci-
fi ed indemnifi cation demands from depositors/underwriters/
sponsors of residential mortgage-backed securities (RMBS) in
connection with lawsuits brought by RMBS investors concerning
alleged misrepresentations in the securitization offering docu-
ments to which WMC is not a party. WMC believes that it has
defenses to these demands.
The reserve estimates refl ect judgment, based on currently
available information, and a number of assumptions, including
economic conditions, claim activity, pending and threatened liti-
gation, indemnifi cation demands, estimated repurchase rates,
and other activity in the mortgage industry. Actual losses arising
from claims against WMC could exceed the reserve amount and
additional claims and lawsuits could result if actual claim rates,
governmental actions, litigation and indemnifi cation activity,
adverse court decisions, settlement activity, actual repurchase
rates or losses WMC incurs on repurchased loans differ from its
assumptions. It is diffi cult to develop a meaningful estimate of
aggregate possible claims exposure because of uncertainties
surrounding economic conditions, the ability and propensity
of mortgage loan holders to present and resolve valid claims,
governmental actions, mortgage industry activity and litiga-
tion, court decisions affecting WMC’s defenses, and pending and
threatened litigation and indemnifi cation demands against WMC.
WMC revenues and other income (loss) from discontinued
operations were $(346) million, $(500) million and $(42) million
in 2013, 2012 and 2011, respectively. In total, WMC’s earnings
(loss) from discontinued operations, net of taxes, were $(232)
million, $(337) million and $(34) million in 2013, 2012 and 2011,
respectively.
OTHER FINANCIAL SERVICES
In the fourth quarter of 2013, we announced the planned dis-
position of Consumer Russia and classifi ed the business as
discontinued operations. Consumer Russia revenues and other
income (loss) from discontinued operations were $260 million,
$276 million and $280 million in 2013, 2012 and 2011, respec-
tively. Consumer Russia earnings (loss) from discontinued
operations, net of taxes, were $(193) million (including a $170 mil-
lion loss on the planned disposal), $33 million and $87 million in
2013, 2012 and 2011, respectively.
In the fi rst quarter of 2013, we announced the planned dis-
position of CLL Trailer Services and classifi ed the business as
discontinued operations. We completed the sale in the fourth
quarter of 2013 for proceeds of $528 million. CLL Trailer Services
revenues and other income (loss) from discontinued operations
were $271 million, $399 million and $464 million in 2013, 2012 and
2011, respectively. CLL Trailer Services earnings (loss) from dis-
continued operations, net of taxes, were $(2) million (including an
$18 million gain on disposal), $22 million and $17 million in 2013,
2012 and 2011, respectively.
In the fi rst quarter of 2012, we announced the planned dis-
position of Consumer Ireland and classifi ed the business as
discontinued operations. We completed the sale in the third
quarter of 2012 for proceeds of $227 million. Consumer Ireland
revenues and other income (loss) from discontinued operations
were an insignifi cant amount, $7 million and $13 million in 2013,
2012 and 2011, respectively. Consumer Ireland earnings (loss)
from discontinued operations, net of taxes, were $6 million, $(195)
million (including a $121 million loss on disposal) and $(153) mil-
lion in 2013, 2012 and 2011, respectively.