GE 2014 Annual Report Download - page 172

152 GE 2014 FORM 10-K
FINANCIAL STATEMENTS HELD FOR SALE & DISCONTINUED OPERATIONS
Reserves related to repurchase claims made against WMC were $809 million at December 31, 2014, reflecting a net increase
to reserves in the twelve months ended December 31, 2014 of $9 million due to incremental provisions offset by settlement
activity. The reserve estimate takes into account recent settlement activity and is based upon WMC’s evaluation of the
remaining exposures as a percentage of estimated lifetime mortgage loan losses within the pool of loans supporting each
securitization. Settlements in prior periods reduced WMC’s exposure on claims asserted in certain securitizations and the
claim amounts reported above give effect to these settlements.
ROLLFORWARD OF THE RESERVE
December 31 (In millions) 2014 2013

Balance, beginning of period $ 800
$ 633
Provision 365
354
Claim resolutions / rescissions (356) (187)
Balance, end of period $ 809
$ 800
Given the significant litigation activity and WMC’s continuing efforts to resolve the lawsuits involving claims made against
WMC, it is difficult to assess whether future losses will be consistent with WMC’s past experience. Adverse changes to WMC’s
assumptions supporting the reserve may result in an increase to these reserves. Taking into account both recent settlement
activity and the potential variability of settlements, WMC estimates a range of reasonably possible loss from $0 to
approximately $500 million over its recorded reserve at December 31, 2014. This estimate excludes any possible loss
associated with an adverse court decision on the applicable statute of limitations, as WMC is unable at this time to develop
such a meaningful estimate.
At December 31, 2014, there were 15 lawsuits involving claims made against WMC arising from alleged breaches of
representations and warranties on mortgage loans included in 14 securitizations. The adverse parties in these cases are
securitization trustees or parties claiming to act on their behalf. Although the alleged claims for relief vary from case to case,
the complaints and counterclaims in these actions generally assert claims for breach of contract, indemnification, and/or
declaratory judgment, and seek specific performance (repurchase of defective mortgage loan) and/or money damages.
Adverse court decisions, including in cases not involving WMC (such as the New York Court of Appeals’ decision on statute of
limitations, expected in 2015), could result in new claims and lawsuits on additional loans. However, WMC continues to believe
that it has defenses to the claims asserted in litigation, including, for example, based on causation and materiality
requirements and applicable statutes of limitations. It is not possible to predict the outcome or impact of these defenses and
other factors, any of which could materially affect the amount of any loss ultimately incurred by WMC on these claims.
WMC has also received indemnification demands, nearly all of which are unspecified, from depositors/underwriters/sponsors
of RMBS in connection with lawsuits brought by RMBS investors concerning alleged misrepresentations in the securitization
offering documents to which WMC is not a party or, in two cases, involving mortgage loan repurchase claims made against
RMBS sponsors. WMC believes that it has defenses to these demands.
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. The reserve and estimate of possible loss reflect
judgment, based on currently available information, and a number of assumptions, including economic conditions, claim and
settlement activity, pending and threatened litigation, court decisions regarding WMC’s legal defenses, indemnification
demands, government activity, and other variables in the mortgage industry. Actual losses arising from claims against WMC
could exceed these amounts and additional claims and lawsuits could result if actual claim rates, governmental actions,
litigation and indemnification activity, adverse court decisions, actual settlement rates or losses WMC incurs on repurchased
loans differ from its assumptions.
FINANCIAL INFORMATION FOR WMC
(In millions) 2014 2013 2012
Total revenues and other income (loss) $ (291) $ (346) $ (500)
Earnings (loss) from discontinued operations, net of taxes $ (199) $ (232) $ (337)