PNC Bank 2014 Annual Report Download - page 42

PNC faces legal and regulatory risk arising out of its
residential mortgage businesses.
Numerous federal and state governmental, legislative and
regulatory authorities are investigating practices in the
business of mortgage and home equity loan lending and
servicing and in the mortgage-related insurance and
reinsurance industries. PNC has received inquiries from
governmental, legislative and regulatory authorities on these
topics and is responding to these inquiries. These inquiries and
investigations could lead to administrative, civil or criminal
proceedings, possibly resulting in remedies including fines,
penalties, restitution, alterations in our business practices and
additional expenses and collateral costs. They could also result
in reputational harm to PNC, either individually or as part of
the overall industry, regardless of the extent to which PNC is
penalized.
In addition to governmental or regulatory inquiries and
investigations, PNC, like other companies with residential
mortgage and home equity loan origination and servicing
operations, faces the risk of class actions, other litigation and
claims from: the owners of, investors in, or purchasers of such
loans originated or serviced by PNC (or securities backed by
such loans), homeowners involved in foreclosure proceedings
or various mortgage-related insurance programs, downstream
purchasers of homes sold after foreclosure, title insurers, and
other potential claimants. Included among these claims are
claims from purchasers of mortgage and home equity loans
seeking the repurchase of loans where the loans allegedly
breached origination covenants and representations and
warranties made to the purchasers in the purchase and sale
agreements.
At this time PNC cannot predict the ultimate overall cost to or
effect upon PNC from governmental, legislative or regulatory
actions and private litigation or claims arising out of
residential mortgage and home equity loan lending, servicing
or reinsurance practices, although such actions, litigation and
claims could, individually or in the aggregate, result in
significant expense. See Note 21 Legal Proceedings and Note
22 Commitments and Guarantees in the Notes To
Consolidated Financial Statements in Item 8 of this Report for
additional information regarding federal and state
governmental, legislative and regulatory inquiries and
investigations and additional information regarding potential
repurchase obligations relating to mortgage and home equity
loans.
There is a continuing risk of incurring costs related to further
remedial and related efforts required by governmental or
regulatory authorities and related to repurchase requests
arising out of either the foreclosure process or origination
issues. Reputational damage arising out of this industry-wide
inquiry could also have an adverse effect upon our existing
mortgage and home equity loan business and could reduce
future business opportunities. Investors in mortgage loans and
other assets that we sell are more likely to seek
indemnification from us against losses or otherwise seek to
have us share in such losses.
The CFPB has issued new rules for mortgage origination and
mortgage servicing. Both the origination and servicing rules
create new private rights of action for consumers against
lenders and servicers like PNC in the event of certain violations.
For additional information concerning the mortgage rules, see
Supervision and Regulation in Item 1 of this Report.
Additionally, two government-sponsored enterprises (GSEs)
(FHLMC and FNMA) are currently in conservatorship, with
its primary regulator acting as a conservator. We cannot
predict when or if the conservatorships will end or whether, as
a result of legislative or regulatory action, there will be any
associated changes to the structure of these GSEs or the
housing finance industry more generally, including, but not
limited to, changes to the relationship among these GSEs, the
government and the private markets. The effects of any such
reform on our business and financial results are uncertain.
Our regional concentrations make us at risk to adverse
economic conditions in our primary retail banking
footprint.
Our retail banking business is primarily concentrated within
our retail branch network footprint. Although our other
businesses are national in scope, to a lesser extent these other
businesses also have a greater presence within these primary
geographic markets. Thus, we are particularly vulnerable to
adverse changes in economic conditions in the Mid-Atlantic,
Midwest, and Southeast regions.
We grow our business in part by acquiring other financial
services companies or assets from time to time, and these
acquisitions present a number of risks and uncertainties
related both to the acquisition transactions themselves and
to the integration of the acquired businesses into PNC
after closing.
Acquisitions of other financial services companies, financial
assets and related deposits and other liabilities present risks
and uncertainties to PNC in addition to those presented by the
nature of the business acquired.
In general, acquisitions may be substantially more expensive
or take longer to complete than anticipated (including
unanticipated costs incurred in connection with the integration
of the acquired company). Anticipated benefits (including
anticipated cost savings and strategic gains, for example
resulting from being able to offer product sets to a broader
potential customer base) may be significantly harder or take
longer to achieve than expected or may not be achieved in
their entirety as a result of unexpected factors or events.
24 The PNC Financial Services Group, Inc. – Form 10-K