2.2.0.25falsefalse0210 - Disclosure - Credit Risktruefalsefalse1falsefalseUSDfalsefalse1/1/2011 - 3/31/2011
USD ($)
USD ($) / shares
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3false0phh_CreditRiskDisclosureTextBlockphhfalsenadurationIncludes disclosure of credit risk plus related receivables and reserves. Examples of included disclosure are the components...falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel| 1falsefalsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 10 - phh:CreditRiskDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt; border-bottom: 1px solid #000000"><b>10. Credit Risk</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company is subject to the following forms of credit risk:
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td><b>Consumer credit risk</b>—through mortgage banking activities as a result of originating and
servicing residential mortgage loans</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td><b>Commercial credit risk</b>—through fleet management and leasing activities</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td><b>Counterparty credit risk</b>—through derivative transactions, sales agreements and various
mortgage loan origination and servicing agreements</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Consumer Credit Risk</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company is not subject to the majority of the risks inherent in maintaining a mortgage loan
portfolio because loans are not held for investment purposes and are generally sold to investors
within 60 days of origination. The majority of mortgage loans sales are on a non-recourse basis;
however, the Company has exposure in certain circumstances in its capacity as a loan originator and
servicer to loan repurchases and indemnifications through representation and warranty provisions.
Additionally, the Company has exposure through its reinsurance agreements that are inactive and in
runoff.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Loan performance is an indicator of the inherent risk associated with our origination and servicing
activities. In limited circumstances, the Company has exposure to possible losses on loans within
the servicing portfolio due to loan repurchases and indemnifications, as further discussed below.
The following tables summarize certain information regarding the total loan servicing portfolio,
which includes loans associated with the capitalized Mortgage servicing rights as well as loans
subserviced for others:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>March 31,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>(In millions)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Loan Servicing Portfolio Composition: </i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Owned
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">143,028</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">140,160</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Subserviced
</div></td>
<td> </td>
<td> </td>
<td align="right">27,683</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">25,915</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total servicing portfolio
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">170,711</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">166,075</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Conventional loans
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">139,092</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">136,261</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Government loans
</div></td>
<td> </td>
<td> </td>
<td align="right">24,969</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,100</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Home equity lines of credit
</div></td>
<td> </td>
<td> </td>
<td align="right">6,650</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,714</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total servicing portfolio
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">170,711</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">166,075</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Weighted-average interest rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">4.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">4.9</td>
<td nowrap="nowrap">%</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>March 31, 2011</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>December 31, 2010</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Number</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Unpaid</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Number</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Unpaid</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>of Loans</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Balance</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>of Loans</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Balance</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Portfolio Delinquency</i><sup style="font-size: 85%; vertical-align: text-top"><i>(1)</i></sup>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">30 days
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">1.99</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">1.70</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">2.36</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">2.01</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">60 days
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">0.48</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">0.45</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">0.67</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">0.60</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">90 or more days
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">0.98</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">1.00</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">1.21</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">1.27</td>
<td nowrap="nowrap">%</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total delinquency
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">3.45</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">3.15</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">4.24</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">3.88</td>
<td nowrap="nowrap">%</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreclosure/real estate owned <sup style="font-size: 85%; vertical-align: text-top">(2)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">2.19</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">2.26</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">2.30</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">2.37</td>
<td nowrap="nowrap">%</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 0pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top">(1)</sup></td>
<td> </td>
<td>Represents the loan servicing portfolio delinquencies as a percentage of the
total number of loans and the total unpaid balance of the portfolio.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top">(2)</sup></td>
<td> </td>
<td>As of March 31, 2011 and December 31, 2010, there were 18,143 and 18,554
of loans in foreclosure with unpaid principal balances of $3.2 billion and $3.3 billion,
respectively.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Foreclosure-Related Reserves</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0%">Representations and warranties are provided to purchasers and insurers on a significant portion of
loans sold and are assumed on purchased mortgage servicing rights. In the event of a breach of
these representations and warranties, the Company may be required to repurchase a mortgage loan or
indemnify the purchaser, and any loss on the mortgage loan may be borne by the Company. If there is
no breach of a representation and warranty provision, there is no obligation to repurchase the loan
or indemnify the investor against loss. In limited circumstances, the full risk of loss on loans
sold is retained to the extent the liquidation of the underlying collateral is insufficient. In
some instances where the Company has purchased loans from third parties, it may have the ability to
recover the loss from the third party.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0%">Foreclosure-related reserves are maintained for the liabilities for probable losses related to
repurchase and indemnification obligations and on-balance sheet loans in foreclosure and real
estate owned. A summary of the activity in foreclosure-related reserves is as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>March 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>(In millions)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance, beginning of period
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">111</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">86</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Realized foreclosure losses
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(16</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(16</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Increase in reserves due to:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Changes in assumptions
</div></td>
<td> </td>
<td> </td>
<td align="right">15</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">New loan sales
</div></td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance, end of period
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">115</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">96</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Foreclosure-related reserves consist of the following:
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><b>Loan Repurchases and Indemnifications</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The maximum exposure to representation and warranty provisions exceeds the amount of loans in
the capitalized portfolio of $141.1 billion; however, the range of total possible losses cannot
be estimated because the Company does not service all of the loans for which it has provided
representations or warranties. As of March 31, 2011, approximately $205 million of loans have
been identified in which the Company has full risk of loss or has identified a breach of
representation and warranty provisions; 15% of which were at least 90 days delinquent
(calculated based upon the unpaid principal balance of the loans).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">As of March 31, 2011 and December 31, 2010, liabilities for probable losses related to
repurchase and indemnification obligations of $78 million and $74 million, respectively, are
included in Other liabilities in the Condensed Consolidated Balance Sheets.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><b>Mortgage Loans in Foreclosure and Real Estate Owned</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Mortgage loans in foreclosure represent the unpaid principal balance of mortgage loans for which
foreclosure proceedings have been initiated, plus recoverable advances made on those loans. These
amounts are recorded net of an allowance for probable losses on such mortgage loans and related
advances.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Real estate owned, which are acquired from mortgagors in default, are recorded at the lower of
the adjusted carrying amount at the time the property is acquired or fair value. Fair value is
determined based upon the estimated net realizable value of the underlying collateral less the
estimated costs to sell.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The carrying values of the mortgage loans in foreclosure and real estate owned are recorded
within Other Assets on the Condensed Consolidated Balance Sheets as follows:
</div>
<div align="center" style="margin-left: 2%">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>March 31,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>(In millions)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Mortgage loans in foreclosure
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">131</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">128</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Allowance for probable losses
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(22</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(22</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Mortgage loans in foreclosure, net
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">109</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">106</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Real Estate Owned
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">50</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">54</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Adjustment to estimated net realizable value
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(15</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(15</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Real Estate Owned, net
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">35</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">39</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Mortgage Reinsurance</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company has exposure to consumer credit risk through losses from two contracts with primary
mortgage insurance companies, that are inactive and in runoff. The Company’s exposure to losses
through these reinsurance contracts is based on mortgage loans pooled by year of origination.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of March 31, 2011, the contractual reinsurance period for each pool was 10 years and the
weighted-average reinsurance period was 4.7 years. Loss rates on these pools are determined based
on the unpaid principal balance of the underlying loans. The Company indemnifies the primary
mortgage insurers for losses that fall between a stated minimum and maximum loss rate on each
annual pool. In return for absorbing this loss exposure, the Company is contractually entitled to a
portion of the insurance premium from the primary mortgage insurers.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company is required to hold securities in trust related to this potential obligation, which
were $255 million, included in Restricted cash, cash equivalents and investments in the Condensed
Consolidated Balance Sheet as of March 31, 2011. The amount of securities held in trust is
contractually specified in the reinsurance agreements and is based on the original risk assumed
under the contracts and the incurred losses to date.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The unpaid reinsurance losses outstanding as of March 31, 2011 were $7 million. As of March 31,
2011, $110 million was included in Other liabilities in the Condensed Consolidated Balance Sheet
for incurred and incurred but not reported losses associated with mortgage reinsurance activities,
which was determined on an undiscounted basis.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">A summary of the activity in reinsurance-related reserves is as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>March 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>(In millions)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance, beginning of period
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">113</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">108</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Realized reinsurance losses
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(16</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Increase in liability for reinsurance losses
</div></td>
<td> </td>
<td> </td>
<td align="right">13</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance, end of period
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">110</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">117</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Commercial Credit Risk</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Vehicle leases are primarily classified as operating leases; however, certain leases are classified
as direct financing leases and recorded within Net investment in fleet leases in the Condensed
Consolidated Balance Sheets.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of March 31, 2011 and December 31, 2010, direct financing leases greater than 90 days past due
total $21 million and $19 million, respectively. As of March 31, 2011 and December 31, 2010,
direct financing leases greater than 90 days that are still accruing interest are $19 million and
$16 million, respectively and the allowance for credit losses was $3 million as of both periods.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Notefalsefalsefalsefalsefalse | Otherus-types:textBlockItemTypestringIncludes disclosure of credit risk plus related receivables and reserves. Examples of included disclosure are the components of accounts receivable, aging of trade accounts receivable, servicing portfolio composition and aging, foreclosure related reserves, mortgage reinsurance, commercial credit risk, and counterparty risk discussion.No authoritative reference available.falsefalse
12Credit RiskUnKnownUnKnownUnKnownUnKnownfalsetrue