PNC » Topics » R ECOURSE A GREEMENT WITH F EDERAL N ATIONAL M ORTGAGE A SSOCIATION
This excerpt taken from the PNC 10-K filed Feb 29, 2008.
AGREEMENT WITH FEDERAL NATIONAL MORTGAGE ASSOCIATION
connection with our July 2007 acquisition of ARCS, we are authorized to originate, underwrite, close and service
commercial mortgage loans and then sell them to Fannie Mae under Fannie Maes DUS program.
Under this program, we assume up to one-third of the risk of loss on unpaid principal balances. At December 31, 2007, the maximum liability was $3.5 billion.
Accordingly, we maintain a reserve for such potential losses which approximates the fair value of this liability. At December 31, 2007, the unpaid principal balance outstanding of loans sold by ARCS as a participant in this program was $11.6
billion. The fair value of the guarantee, in the form of reserves for losses under this program, totaled $39 million as of December 31, 2007 and is included in Other liabilities on our Consolidated Balance Sheet. If payment is required under
this program, we would not have an interest in the collateral underlying the mortgage loans on which losses occurred. The serviced loans are not included on our Consolidated Balance Sheet.
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