PNC Bank 2012 Annual Report Download - page 100

Home Equity Repurchase Obligations
PNC’s repurchase obligations include obligations with respect
to certain brokered home equity loans/lines that were sold to a
limited number of private investors in the financial services
industry by National City prior to our acquisition of National
City. PNC is no longer engaged in the brokered home equity
lending business, and our exposure under these loan
repurchase obligations is limited to repurchases of the loans
sold in these transactions. Repurchase activity associated with
brokered home equity lines/loans is reported in the Non-
Strategic Assets Portfolio segment.
Loan covenants and representations and warranties were
established through loan sale agreements with various
investors to provide assurance that loans PNC sold to the
investors are of sufficient investment quality. Key aspects of
such covenants and representations and warranties include the
loan’s compliance with any applicable loan criteria established
for the transaction, including underwriting standards, delivery
of all required loan documents to the investor or its designated
party, sufficient collateral valuation, and the validity of the
lien securing the loan. As a result of alleged breaches of these
contractual obligations, investors may request PNC to
indemnify them against losses on certain loans or to
repurchase loans.
We investigate every investor claim on a loan by loan basis to
determine the existence of a legitimate claim, and that all
other conditions for indemnification or repurchase have been
met prior to settlement with that investor. Indemnifications for
loss or loan repurchases typically occur when, after review of
the claim, we agree insufficient evidence exists to dispute the
investor’s claim that a breach of a loan covenant and
representation and warranty has occurred, such breach has not
been cured, and the effect of such breach is deemed to have
had a material and adverse effect on the value of the
transferred loan. Depending on the sale agreement and upon
proper notice from the investor, we typically respond to home
equity indemnification and repurchase requests within 60
days, although final resolution of the claim may take a longer
period of time. Most home equity sale agreements do not
provide for penalties or other remedies if we do not respond
timely to investor indemnification or repurchase requests.
Investor indemnification or repurchase claims are typically
settled on an individual loan basis through make-whole
payments or loan repurchases; however, on occasion we may
negotiate pooled settlements with investors. In connection
with pooled settlements, we typically do not repurchase loans
and the consummation of such transactions generally results in
us no longer having indemnification and repurchase exposure
with the investor in the transaction.
The following table details the unpaid principal balance of our
unresolved home equity indemnification and repurchase
claims at December 31, 2012 and December 31, 2011,
respectively.
Table 31: Analysis of Home Equity Unresolved Asserted
Indemnification and Repurchase Claims
In millions
December 31
2012
December 31
2011
Home equity loans/lines:
Private investors (a) $74 $110
(a) Activity relates to brokered home equity loans/lines sold through loan sale
transactions which occurred during 2005-2007.
The PNC Financial Services Group, Inc. – Form 10-K 81