GE 2010 Annual Report Download - page 85

GE 2010 ANNUAL REPORT 83
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total loans WMC originated and sold will be tendered for repur-
chase, and of those tendered, only a limited amount will qualify as
“validly tendered,” meaning the loans sold did not satisfy specified
contractual obligations. New claims received over the past three
years have declined from $859 million in 2008 to $320 million in
2010. WMC’s current reserve represents our best estimate of
losses with respect to WMC’s repurchase obligations. Actual losses
could exceed the reserve amount if actual claim rates, valid ten-
ders or losses WMC incurs on repurchased loans are higher than
historically observed.
WMC revenues from discontinued operations were $(4) million,
$2 million and $(71) million in 2010, 2009 and 2008, respectively.
In total, WMC’s losses from discontinued operations, net of taxes,
were $7 million, $1 million and $41 million in 2010, 2009 and
2008, respectively.
OTHER FINANCIAL SERVICES
In the fourth quarter of 2010, we entered into agreements to
sell our Consumer RV Marine portfolio and Consumer Mexico
business. Consumer RV Marine revenues from discontinued
operations were $210 million, $260 million and $296 million in
2010, 2009 and 2008, respectively. Consumer RV Marine losses
from discontinued operations, net of taxes, were $99 million,
$83 million and $58 million in 2010, 2009 and 2008, respectively.
Consumer Mexico revenues from discontinued operations were
$228 million, $303 million and $479 million in 2010, 2009 and
2008, respectively. Consumer Mexico earnings (loss) from discon-
tinued operations, net of taxes, were $(59) million, $66 million and
$31 million in 2010, 2009 and 2008, respectively.
GE INDUSTRIAL
GE industrial earnings (loss) from discontinued operations, net of
taxes, were $(4) million, $(18) million and $40 million in 2010, 2009
and 2008, respectively. The sum of GE industrial earnings (loss)
from discontinued operations, net of taxes, and GECS earnings
(loss) from discontinued operations, net of taxes, is reported as
GE industrial earnings (loss) from discontinued operations, net
of taxes, on the Statement of Earnings.
Assets of GE industrial discontinued operations were $50 mil-
lion at both December 31, 2010 and 2009. Liabilities of GE industrial
discontinued operations were $164 million and $163 million at
December 31, 2010 and 2009, respectively, and primarily represent
taxes payable and pension liabilities related to the sale of our
Plastics business in 2007.
The amount of these reserves is based on analyses of recent
and historical claims experience, pending and estimated future
excess interest refund requests, the estimated percentage of
customers who present valid requests, and our estimated pay-
ments related to those requests. Our estimated liability for
excess interest refund claims at December 31, 2010 assumes the
pace of incoming claims will decelerate, average exposure per
claim remains consistent with recent experience, and we see the
impact of our loss mitigation efforts. Estimating the pace of
decline in incoming claims can have a significant effect on the
total amount of our liability. For example, our third quarter 2010
estimate assumes incoming average daily claims will decline at a
long-term average rate of 4% monthly. Holding all other assump-
tions constant, if claims declined at a rate of one percent higher
or lower than assumed, our liability estimate would change by
approximately $250 million.
Uncertainties around the impact of laws and regulations,
challenging economic conditions, the runoff status of the under-
lying book of business and the effects of our mitigation efforts
make it difficult to develop a meaningful estimate of the aggre-
gate possible claims exposure. Recent trends, including the effect
of governmental actions, market activity regarding other personal
loan companies and consumer activity, may continue to have an
adverse effect on claims development.
GE Money Japan revenues from discontinued operations were
an insignificant amount in both 2010 and 2009, and $763 million in
2008. In total, GE Money Japan losses from discontinued operations,
net of taxes, were $1,671 million, $158 million and $651 million for
2010, 2009 and 2008, respectively.
WMC
During the fourth quarter of 2007, we completed the sale of
WMC, our U.S. mortgage business. WMC substantially discontin-
ued all new loan originations by the second quarter of 2007, and
is not a loan servicer. In connection with the sale, WMC retained
certain obligations related to loans sold prior to the disposal of
the business, including WMC’s contractual obligations to repur-
chase previously sold loans as to which there was an early
payment default or with respect to which certain contractual
representations and warranties were not met. All claims received
for early payment default have either been resolved or are no
longer being pursued.
Pending claims for unmet representations and warranties
have declined from approximately $800 million at December 31,
2009 to approximately $350 million at December 31, 2010.
Reserves related to these contractual representations and war-
ranties were $101 million at December 31, 2010, and $205 million
at December 31, 2009. The amount of these reserves is based
upon pending and estimated future loan repurchase requests, the
estimated percentage of loans validly tendered for repurchase,
and our estimated losses on loans repurchased. Based on our
historical experience, we estimate that a small percentage of the