This excerpt taken from the PNC 10-Q filed May 11, 2009.
We sell residential and commercial mortgage loans to government-sponsored enterprises (GSEs) and in certain instances to other third-party investors. The GSEs, such as Government National Mortgage Association (GNMA), Federal National Mortgage Association (FNMA), and the Federal Home Loan Mortgage Corporation (FHLMC), generally securitize our transferred loans into mortgage-backed securities for sale into the secondary market. Generally, we do not retain any interest in the transferred loans other than mortgage servicing rights. Refer to Note 9 Goodwill and Other Intangible Assets for further discussion on our residential and commercial mortgage servicing rights assets. During the first three months of 2009, residential and commercial mortgage loans sold totaled $6.3 billion and $1.7 billion, respectively. During the first three months of 2008, commercial mortgage loans sold totaled $719 million. There were no residential mortgage loans sales in the first three months of 2008 as these activities were obtained through our acquisition of National City.
Our continuing involvement in these loan sales consists primarily of servicing and limited repurchase obligations for loan and servicer breaches in representations and warranties. Generally, we hold a cleanup call repurchase option for loans sold with servicing retained to the other third-party investors. In certain circumstances as servicer, we advance principal and interest payments to the GSEs and other third-party investors. Our risk of loss in these servicing advances is generally minimal.
We maintain a liability for estimated losses on loans expected to be repurchased as a result of breaches in loan and servicer representations and warranties. We have also entered into recourse arrangements associated with commercial mortgage loans sold to FNMA and FHLMC. Refer to Note 18 Commitments and Guarantees for further discussion on our repurchase liability and recourse arrangements. Our maximum exposure to loss in our loan sale activities is limited to these repurchase and recourse obligations.
In addition, for certain loans sold to GNMA and FNMA, we hold an option to repurchase individual delinquent loans that meet certain criteria. Without prior authorization from these GSEs, this option gives PNC the ability to repurchase the delinquent loan at par. Under SFAS 140, once we have the unilateral ability to repurchase the delinquent loan, effective control over the loan has been regained and we are required to recognize the loan and a corresponding repurchase liability on the balance sheet regardless of our intent to repurchase the loan. At March 31, 2009 and December 31, 2008, the balance of our repurchase option asset and liability totaled $996 million and $476 million, respectively.