PNC Bank 2013 Annual Report Download - page 86

with the Agency securitizations, most sale agreements do not
provide for penalties or other remedies if we do not respond
timely to investor indemnification or repurchase requests.
Indemnification and repurchase claims are often settled on an
individual basis through make-whole payments or loan
repurchases, although we may also negotiate pooled
settlements with investors. In connection with pooled
settlements, we typically do not repurchase loans and the
consummation of such transactions generally results in us no
longer having indemnification and repurchase exposure with
the investor in the transaction.
For the first and second-lien mortgage settled claims
contained in the table below, a significant amount of these
claims were associated with sold loans originated through
correspondent lender and broker origination channels. In
certain instances when indemnification or repurchase claims
are settled for these types of sold loans, we have recourse back
to the correspondent lenders, brokers and other third-parties
(e.g., contract underwriting companies, closing agents,
appraisers, etc.). Depending on the underlying reason for the
investor claim, we determine our ability to pursue recourse
with these parties and file claims with them accordingly. Our
historical recourse recovery rate has been insignificant as our
efforts have been impacted by the inability of such parties to
reimburse us for their recourse obligations (e.g., their capital
availability or whether they remain in business) or factors that
limit our ability to pursue recourse from these parties (e.g.,
contractual loss caps, statutes of limitations).
Origination and sale of residential mortgages is an ongoing
business activity and, accordingly, management continually
assesses the need to recognize indemnification and repurchase
liabilities pursuant to the associated investor sale agreements.
We establish indemnification and repurchase liabilities for
estimated losses on sold first and second-lien mortgages for
which indemnification is expected to be provided or for loans
that are expected to be repurchased. For the first and second-
lien mortgage sold portfolio, we have established an
indemnification and repurchase liability pursuant to investor
sale agreements based on claims made and our estimate of
future claims on a loan by loan basis. To estimate the
mortgage repurchase liability arising from breaches of
representations and warranties, we consider the following
factors: (i) borrower performance in our historically sold
portfolio (both actual and estimated future defaults), (ii) the
level of outstanding unresolved repurchase claims,
(iii) estimated probable future repurchase claims, considering
information about file requests, delinquent and liquidated
loans, resolved and unresolved mortgage insurance rescission
notices and our historical experience with claim rescissions,
(iv) the potential ability to cure the defects identified in the
repurchase claims (“rescission rate”) and (v) the estimated
severity of loss upon repurchase of the loan or collateral,
make-whole settlement or indemnification.
See Note 24 Commitments and Guarantees in the Notes To
Consolidated Financial Statements in Item 8 of this Report for
additional information.
The following tables present the unpaid principal balance of repurchase claims by vintage and total unresolved repurchase claims
for the past five quarters.
Table 30: Analysis of Quarterly Residential Mortgage Repurchase Claims by Vintage
Dollars in millions
December 31
2013
September 30
2013
June 30
2013
March 31
2013
December 31
2012
2004 & Prior $ 66 $ 41 $ 51 $ 12 $ 11
2005 88 48 7 10 8
2006 27 27 19 28 23
2007 35 58 36 108 45
2008 979157
2008 & Prior 225 181 122 173 94
2009 – 2013 19 16 14 50 38
Total $244 $197 $136 $223 $132
FNMA, FHLMC and GNMA % 96% 90% 92% 95% 94%
Table 31: Analysis of Quarterly Residential Mortgage Unresolved Asserted Indemnification and Repurchase Claims
Dollars in millions
December 31
2013
September 30
2013
June 30
2013
March 31
2013
December 31
2012
FNMA, FHLMC and GNMA Securitizations $13 $148 $ 96 $165 $290
Private Investors (a) 22 24 37 45 47
Total unresolved claims $35 $172 $133 $210 $337
FNMA, FHLMC and GNMA % 37% 86% 72% 79% 86%
(a) Activity relates to loans sold through Non-Agency securitization and loan sale transactions.
68 The PNC Financial Services Group, Inc. – Form 10-K