SunTrust 2011 Annual Report Download - page 184
Download and view the complete annual report
Please find page 184 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)
168
related repurchase provision is recognized in mortgage production related (loss)/income in the Consolidated Statements of
Income/(Loss).
A significant degree of judgment is used to estimate the mortgage repurchase liability. This estimation process is inherently
uncertain and subject to imprecision; consequently, there is a range of reasonably possible loss in excess of the recorded
repurchase liability. Based on an analysis of the assumptions used to estimate the repurchase liability related to loans sold prior
to 2009, the Company estimates that it is reasonably possible that the estimated liability, as of December 31, 2011, could exceed
the current repurchase liability by $0 to $700 million. This estimate is subject to revision due to changes in borrower default
levels, investor request criteria and behavior, repurchase rates, and home values. This estimate of reasonably possible
incremental loss does not pertain to non-agency investors or to loans sold after 2008 due to the limited amount of historical
repurchase request and loss experience the Company has realized on these more recent vintages; therefore, the Company is
unable to estimate a reasonably possible range of loss for loans sold to non-agency investors or for loans sold subsequent to
2008. The following table summarizes the changes in the Company’s reserve for mortgage loan repurchases:
(Dollars in millions)
Balance at beginning of period
Repurchase provision
Charge-offs
Balance at end of period
Year Ended December 31
2011
$265
502
(447)
$320
2010
$200
456
(391)
$265
2009
$92
444
(336)
$200
During the years ended December 31, 2011 and 2010, the Company repurchased or otherwise settled mortgages with unpaid
principal balances of $789 million and $677 million, respectively, related to investor demands. As of December 31, 2011 and
2010, the carrying value of outstanding repurchased mortgage loans, net of any allowance for loan losses, totaled $252 million
and $153 million, respectively, of which $134 million and $86 million, respectively, were nonperforming.
As of December 31, 2011, the Company maintained a reserve for costs associated with foreclosure delays of loans serviced
for GSEs. The Company normally retains servicing rights when loans are transferred. As servicer, the Company makes
representations and warranties that it will service the loans in accordance with investor servicing guidelines and standards
which include collection and remittance of principal and interest, administration of escrow for taxes and insurance, advancing
principal, interest, taxes, insurance and collection expenses on delinquent accounts, loss mitigation strategies including loan
modifications, and foreclosures. STM recognizes a liability for contingent losses when MSRs are sold, which totaled $8 million
and $6 million as of December 31, 2011 and 2010, respectively.
Contingent Consideration
The Company has contingent payment obligations related to certain business combination transactions. Payments are calculated
using certain post-acquisition performance criteria. Arrangements entered into prior to January 1, 2009 are not recorded as
liabilities until the contingency is resolved; whereas, arrangements entered into subsequent to that date are recorded as liabilities
at the fair value of the contingent payment. The potential obligation associated with these arrangements was $10 million and
$5 million as of December 31, 2011 and December 31, 2010, respectively, of which $10 million and $3 million were recorded
as a liability representing the fair value of the contingent payments as of December 31, 2011 and December 31, 2010,
respectively. If required, these contingent payments will be payable over the next three years.
Visa
The Company issues and acquires credit and debit card transactions through Visa. The Company is a defendant, along with
Visa and MasterCard International (the “Card Associations”), as well as several other banks, in one of several antitrust lawsuits
challenging the practices of the Card Associations (the “Litigation”). The Company has entered into judgment and loss sharing
agreements with Visa and certain other banks in order to apportion financial responsibilities arising from any potential adverse
judgment or negotiated settlements related to the Litigation. Additionally, in connection with Visa’s restructuring in 2007, a
provision of the original Visa By-Laws, Section 2.05j, was restated in Visa’s certificate of incorporation. Section 2.05j contains
a general indemnification provision between a Visa member and Visa, and explicitly provides that after the closing of the
restructuring, each member’s indemnification obligation is limited to losses arising from its own conduct and the specifically
defined Litigation. The maximum potential amount of future payments that the Company could be required to make under this
indemnification provision cannot be determined as there is no limitation provided under the By-Laws and the amount of
exposure is dependent on the outcome of the Litigation. As of December 31, 2011, Visa had funded $8.1 billion into an escrow