SunTrust 2011 Annual Report Download - page 183
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Please find page 183 of the 2011 SunTrust 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.Notes to Consolidated Financial Statements (Continued)
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a component of the unfunded commitment reserve recorded in other liabilities in the Consolidated Balance Sheets included in
the allowance for credit losses as disclosed in Note 7, “Allowance for Credit Losses.”
Loan Sales
STM, a consolidated subsidiary of SunTrust, originates and purchases residential mortgage loans, a portion of which are sold
to outside investors in the normal course of business, through a combination of whole loan sales to GSEs, Ginnie Mae, and
non-agency investors. Prior to 2008, the Company also sold loans through a limited amount of Company sponsored
securitizations. When mortgage loans are sold, representations and warranties regarding certain attributes of the loans sold are
made to these third party purchasers. Subsequent to the sale, if a material underwriting deficiency or documentation defect is
discovered, STM may be obligated to repurchase the mortgage loan or to reimburse the investor for losses incurred (make
whole requests) if such deficiency or defect cannot be cured by STM within the specified period following discovery. Defects
in the securitization process or breaches of underwriting and servicing representations and warranties can result in loan
repurchases, as well as adversely affect the valuation of MSRs, servicing advances or other mortgage loan related exposures,
such as OREO. These representations and warranties may extend through the life of the mortgage loan. STM’s risk of loss
under its representations and warranties is largely driven by borrower payment performance since investors will perform
extensive reviews of delinquent loans as a means of mitigating losses.
Loan repurchase requests generally arise from loans sold during the period from January 1, 2005 to December 31, 2011, which
totaled $244.3 billion at the time of sale, consisting of $187.4 billion and $30.3 billion of agency and non-agency loans,
respectively, as well as $26.6 billion of loans sold to Ginnie Mae. The composition of the remaining outstanding balance by
vintage and type of buyer as of December 31, 2011 is shown in the following table:
(Dollars in billions)
GSE1
Ginnie Mae1
Non-agency
Total
Remaining Outstanding Balance by Year of Sale
2005
$4.5
0.7
4.0
$9.2
2006
$5.4
0.5
5.8
$11.7
2007
$10.4
0.6
4.6
$15.6
2008
$11.1
2.7
—
$13.8
2009
$24.9
5.7
—
$30.6
2010
$14.2
4.1
—
$18.3
2011
$13.8
3.1
—
$16.9
Total
$84.3
17.4
14.4
$116.1
1 Balances based on loans serviced by the Company.
Non-agency loan sales include whole loans and loans sold in private securitization transactions. While representations and
warranties have been made related to these sales, they differ in many cases from those made in connection with loans sold to
the GSEs in that non-agency loans may not be required to meet the same underwriting standards and, in addition to identifying
a representation or warranty breach, non-agency investors are generally required to demonstrate that the breach was material
and directly related to the cause of default. Loans sold to Ginnie Mae are insured by either the FHA or VA. As servicer, we
may elect to repurchase delinquent loans in accordance with Ginnie Mae guidelines; however, the loans continue to be insured.
Although we indemnify the FHA and VA for losses related to loans not originated in accordance with their guidelines, such
occurrences are limited and no repurchase liability has been recorded for loans sold to Ginnie Mae.
Although the timing and volume has varied, repurchase and make whole requests have increased over the past several years
and more recently during the latter half of 2011. Repurchase requests from GSEs and non-agency investors were $1.7 billion,
$1.1 billion, and $1.1 billion during the years ended 2011, 2010, and 2009, respectively, and on a cumulative basis since 2005
has been $5.3 billion, which includes Ginnie Mae repurchase requests. The majority of these requests are from GSEs, with a
limited number of requests having been received related to non-agency investors. Repurchase requests from non-agency
investors were $50 million, $55 million, and $99 million during the years ended December 31, 2011, 2010, and 2009,
respectively. Additionally, repurchase requests related to loans originated in 2006 and 2007 have consistently comprised the
vast majority of total repurchase requests during the past three years. The repurchase and make whole requests received have
been primarily due to material breaches of representations related to compliance with the applicable underwriting standards,
including borrower misrepresentation and appraisal issues. STM performs a loan by loan review of all requests, and demands
have been contested to the extent they are not considered valid. At December 31, 2011, the unpaid principal balance of loans
related to unresolved requests previously received from investors was $590 million, comprised of $578 million from the GSEs
and $12 million from non-agency investors. Comparable amounts at December 31, 2010, were $293 million, comprised of
$264 million from the GSEs and $29 million from non-agency investors.
The Company uses the best information available when estimating its mortgage repurchase liability. As of December 31, 2011
and 2010, the Company's estimate of the liability for incurred losses related to all vintages of mortgage loans sold totaled $320
million and $265 million, respectively. The liability is recorded in other liabilities in the Consolidated Balance Sheets, and the