PNC Bank 2010 Annual Report Download - page 190
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Please find page 190 of the 2010 PNC Bank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.pursuant to the associated investor sale agreements. We
establish indemnification and repurchase liabilities for
estimated losses on sold first and second-lien mortgages and
home equity loans/lines for which indemnification is expected
to be provided or for loans that are expected to be repurchased.
For the first and second-lien mortgage sold portfolio, we have
established an indemnification and repurchase liability pursuant
to investor sale agreements based on claims made and our
estimate of future claims on a loan by loan basis. These relate
primarily to loans originated in years 2006-2008. For the home
equity loans/lines sold portfolio, we have established
indemnification and repurchase liabilities based upon this same
methodology for loans sold from 2005-2007.
Indemnification and repurchase liabilities are initially
recognized when loans are sold to investors and are
subsequently evaluated for adequacy by management. Initial
recognition and subsequent adjustments to the indemnification
and repurchase liability for the first and second-lien mortgage
sold portfolio are recognized in Residential mortgage revenue
on the Consolidated Income Statement. Since PNC is no
longer engaged in the brokered home equity lending business,
only subsequent adjustments are recognized to the home
equity loans/lines indemnification and repurchase liability.
These adjustments are recognized in Other noninterest income
on the Consolidated Income Statement.
Management’s subsequent evaluation of these indemnification
and repurchase liabilities is based upon trends in
indemnification and repurchase requests, actual loss
experience, known and inherent risks in the underlying
serviced loan portfolios, and current economic conditions. As
part of its evaluation, management considers estimated loss
projections over the life of the subject loan portfolio. At
December 31, 2010 and 2009, the total indemnification and
repurchase liability for estimated losses on indemnification
and repurchase claims totaled $294 million and $270 million,
respectively, and was included in Other liabilities on the
Consolidated Balance Sheet. An analysis of the changes in this
liability during 2010 and 2009 follows:
Analysis of Indemnification and Repurchase Liability for Asserted and Unasserted Claims
2010 2009
In millions
Residential
Mortgages (a)
Home Equity
Loans/Lines (b) Total
Residential
Mortgages (a)
Home Equity
Loans/Lines (b) Total
January 1 $ 229 $ 41 $ 270 $ 300 $101 $ 401
Reserve adjustments, net (c) 120 144 264 230 (9) 221
Losses – loan repurchases and settlements (205) (35) (240) (301) (51) (352)
December 31 $ 144 $150 $ 294 $ 229 $ 41 $ 270
(a) Repurchase obligation associated with sold loan portfolios of $139.8 billion and $157.2 billion at December 31, 2010 and December 31, 2009, respectively.
(b) Repurchase obligation associated with sold loan portfolios of $6.5 billion and $7.5 billion at December 31, 2010 and December 31, 2009, respectively. PNC is no longer in engaged in
the brokered home equity business which was acquired with National City.
(c) Includes $157 million in 2009 for residential mortgages related to the final purchase price allocation associated with the National City acquisition.
R
EINSURANCE
A
GREEMENTS
We have two wholly-owned captive insurance subsidiaries
which provide reinsurance to third-party insurers related to
insurance sold to our customers. These subsidiaries enter into
various types of reinsurance agreements with third-party
insurers where the subsidiary assumes the risk of loss through
either an excess of loss or quota share agreement up to 100%
reinsurance. In excess of loss agreements, these subsidiaries
assume the risk of loss for an excess layer of coverage up to
specified limits, once a defined first loss percentage is met. In
quota share agreements, the subsidiaries and third-party
insurers share the responsibility for payment of all claims.
Reserves recognized for probable losses on these policies and
the aggregate maximum exposure up to the specified limits for
all reinsurance contracts were as follows:
Reinsurance Agreements
In millions except as noted
December 31,
2010
Reserves for probable losses $150
Maximum exposure (billions) $ 4.5
The comparable amount of reserves for probable losses as of
December 31, 2009 was $220 million.
R
EPURCHASE AND
R
ESALE
A
GREEMENTS
We enter into repurchase and resale agreements where we
transfer investment securities to/from a third party with the
agreement to repurchase/resell those investment securities at a
future date for a specified price. These transactions are
accounted for as collateralized borrowings/financings.
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