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resolution process, will be needed to resolve all of the claims that are the subject of these discussions. On December
5, 2014, SCC entered into a settlement agreement to resolve certain of these claims. On December 18, 2015, SCC
entered into settlement agreements with two additional counterparties to resolve certain additional claims, subject
to the terms and conditions set forth in the settlement agreements. The amounts paid under the settlement
agreements were fully covered by prior accruals. In the event that the ongoing efforts to settle are not successful, SCC
believes claim volumes may increase or litigation may result.
SCC will continue to vigorously contest any request for repurchase when it has concluded that a valid basis for
repurchase does not exist. SCC's decision whether to engage in bulk settlement discussions is based on factors that
vary by counterparty or type of counterparty and include the considerations used by SCC in determining its loss
estimate, described below under "Liability for Estimated Contingent Losses."
LIABILITY FOR ESTIMATED CONTINGENT LOSSES – SCC accrues a liability for losses related to representation and
warranty claims when those losses are believed to be both probable and reasonably estimable. Development of loss
estimates is subject to a high degree of management judgment and estimates may vary significantly period to period.
SCC's loss estimate as of April 30, 2016 is based on the best information currently available, significant management
judgment, and a number of factors that are subject to change, including developments in case law and the factors
mentioned below. These factors include the terms of prior bulk settlements, the terms expected to result from ongoing
bulk settlement discussions, and an assessment of, among other things, historical claim results, threatened claims,
terms and provisions of related agreements, counterparty willingness to pursue a settlement, legal standing of
counterparties to provide a comprehensive settlement, bulk settlement methodologies used and publicly disclosed
by other market participants, the potential pro-rata realization of the claims as compared to all claims and other
relevant facts and circumstances when developing its estimate of probable loss. SCC believes that the most significant
of these factors are the terms expected to result from ongoing bulk settlement discussions, which have been primarily
influenced by the bulk settlement methodologies used and publicly disclosed by other market participants and the
anticipated pro-rata realization of the claims of particular counterparties as compared to the anticipated realization
if all claims and litigation were resolved together with payment of SCC's related administration and legal expense.
Changes in any one of the factors mentioned above could significantly impact the estimate.
The liability is included in deferred revenue and other current liabilities on the consolidated balance sheets. A
rollforward of SCC's accrued liability for these loss contingencies is as follows:
(in 000s)
Year ended April 30, 2016 2015 2014
Balance, beginning of the year $ 149,765 $ 183,765 $ 158,765
Loss provisions 4,000 16,000 25,000
Payments (88,500) (50,000) —
Balance, end of the year $ 65,265 $ 149,765 $ 183,765
On June 11, 2015, the New York Court of Appeals, New York's highest court, held in ACE Securities Corp. v. DB
Structured Products, Inc., that the six-year statute of limitations under New York law starts to run at the time the
representations and warranties are made, not the date when the repurchase demand was denied. This decision applies
to claims and lawsuits brought against SCC where New York law governs. New York law governs many, though not all,
of the RMBS transactions into which SCC entered. However this decision would not affect representation and warranty
claims and lawsuits SCC has received or may receive, for example, where the statute of limitations has been tolled by
agreement or a suit was timely filed. It is possible that in response to the statute of limitations rulings in the ACE case
and similar rulings in other state and federal courts, parties seeking to pursue representation and warranty claims or
lawsuits with respect to trusts where the statute of limitations for representation and warranty claims against the
originator has run, may seek to distinguish certain aspects of the ACE decision, pursue alternate legal theories of
recovery, or assert claims against other contractual parties such as securitization trustees. For example, a recent ruling
by a New York intermediate appellate court allowed a counterparty to pursue litigation on additional loans in the
same trust even though only some of the loans complied with the condition precedent of timely pre-suit notice and
opportunity to cure or repurchase. The impact on SCC, if any, from alternative legal theories seeking to avoid or
distinguish the ACE decision, or judicial limitations on the ACE decision, is unclear. SCC has not accrued liabilities for
claims not subject to a tolling arrangement or not asserted prior to the expiration of the applicable statute of limitations.