eTrade 2004 Annual Report Download - page 125

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Table of Contents
Index to Financial Statements
Commitments—Loans
In the normal course of business, the Bank makes various commitments to extend credit and incur contingent liabilities that are not
reflected in the consolidated balance sheets. The Bank had the following loan commitments (in thousands):
Significant changes in the economy or interest rate influence the impact that these commitments and contingencies has on the Company
in the future.
At December 31, 2004, the Bank had commitments to purchase $0.4 billion and sell $0.9 billion in securities. In addition, the Bank had
approximately $1.6 billion of certificates of deposit scheduled to mature in less than one year and $3.1 billion of unfunded commitments to
extend credit.
Guarantees
December 31, 2004
Fixed
Rate
Variable
Rate
Total
Commitments to purchase loans:
Mortgage loans
$
50,404
$
$
170,666
Other loans
7,582
—
7,582
Total commitments to purchase loans
$
57,986
$
$
178,248
Commitments to originate loans:
Mortgage loans
$
168,753
$
52,219
$
220,972
Other loans
345,969
—
345,969
Total commitments to originate loans
$
514,722
$
52,219
$
566,941
Commitments to sell mortgage loans
$
42,061
$
50,390
$
92,451
As part of business combinations completed during the last three years, the Company is obligated to make certain additional payments in
cash and/or stock in the event certain milestones are achieved by the acquired entities. See Note 4 for further information.
E*TRADE Bank provides guarantees to investors purchasing mortgage loans, which are considered standard representations and
warranties within the mortgage industry. The primary guarantees, are as follows:
•
The mortgage and the mortgage note have been duly executed and each is the legal, valid and binding obligation of E*TRADE Bank,
enforceable in accordance with its terms. The mortgage has been duly acknowledged and recorded and is valid. The mortgage and the
mortgage note are not subject to any right of rescission, set-off, counterclaim or defense, including, without limitation, the defense of
usury, and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto. If these claims prove to
be untrue, the investor can require E*TRADE Bank to repurchase the loan and return all loan premium pricing and service release
premiums.
•
Should any eligible mortgage loan delivered pay off prior to the receipt of the first payment, loan premium pricing and service release
premium shall be fully refundable.
Management has determined that the maximum potential liability under these guarantees at December 31, 2004 is $38.1 million based on
all available information. The current carrying amount of the liability recorded at December 31, 2004 is $1.0 million and is considered adequate
based upon analysis of historical trends and current economic conditions for these guarantees. At December 31, 2003, the maximum potential
liability was $69.3 million and the carrying value of the liability was $3.5 million.
115
•
Should any eligible mortgage loan delivered to an investor pay off after the receipt of the first payment and a contractually designated
period of time (typically 60 to 120 days from the date of purchase), the servicing released premium shall be fully refunded.