PNC Bank 2013 Annual Report Download - page 40

Although we establish accruals for legal proceedings when
information related to the loss contingencies represented by
those matters indicates both that a loss is probable and that the
amount of loss can be reasonably estimated, we do not have
accruals for all legal proceedings where we face a risk of loss.
In addition, due to the inherent subjectivity of the assessments
and unpredictability of the outcome of legal proceedings,
amounts accrued may not represent the ultimate loss to us
from the legal proceedings in question. Thus, our ultimate
losses may be higher, and possibly significantly so, than the
amounts accrued for legal loss contingencies.
We discuss further the unpredictability of legal proceedings
and describe certain of our pending legal proceedings in Note
23 Legal Proceedings in the Notes To Consolidated Financial
Statements in Item 8 of this Report.
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.
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 23 Legal Proceedings and Note
24 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 consent orders 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, each GSE is 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 the GSEs or the housing
finance industry more generally, including, but not limited to,
changes to the relationship among the 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
services 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
22 The PNC Financial Services Group, Inc. – Form 10-K