Variable interest entities

For a further description of JPMorgan Chase’s accounting policies regarding consolidation of variable interest entities (“VIEs”), see Note 1 on pages 193–194 of JPMorgan Chase’s 2012 Annual Report.

The following table summarizes the most significant types of Firm-sponsored VIEs by business segment.



Line-of-Business	Transaction Type	Activity	Form 10-Q page reference
CCB	Credit card securitization trusts	Securitization of both originated and purchased credit card receivables	151
	Mortgage securitization trusts	Securitization of originated and purchased residential mortgages	151–153
	Other securitization trusts	Securitization of originated automobile and student loans	151–153
CIB	Mortgage and other securitization trusts	Securitization of both originated and purchased residential and commercial mortgages, automobile and student loans	151–153
	Multi-seller conduits Investor intermediation activities:	Assist clients in accessing the financial markets in a cost-efficient manner and structures transactions to meet investor needs	153
	Municipal bond vehicles		153–154
	Credit-related note and asset swap vehicles		154

The Firm also invests in and provides financing and other services to VIEs sponsored by third parties, as described in Note 16 on page 288 of JPMorgan Chase’s 2012 Annual Report.

Significant Firm-sponsored variable interest entities

Credit card securitizations

For a more detailed discussion of JPMorgan Chase’s involvement with credit card securitizations, see Note 16 on page 281 of JPMorgan Chase’s 2012 Annual Report.

As a result of the Firm’s continuing involvement, the Firm is considered to be the primary beneficiary of its Firm-sponsored credit card securitization trusts. This includes the Firm’s primary card securitization trust, Chase Issuance Trust. See the table on page 155 of this Note for further information on consolidated VIE assets and liabilities.

Firm-sponsored mortgage and other securitization trusts

The Firm securitizes (or has securitized) originated and purchased residential mortgages, commercial mortgages and other consumer loans (including automobile and student loans) primarily in its CIB and CCB businesses. Depending on the particular transaction, as well as the respective business involved, the Firm may act as the servicer of the loans and/or retain certain beneficial interest in the securitization trusts.

For a detailed discussion of the Firm’s involvement with Firm-sponsored mortgage and other securitization trusts, as well as the accounting treatment relating to such trusts, see Note 16 on pages 281–284 of JPMorgan Chase’s 2012 Annual Report.

The following table presents the total unpaid principal amount of assets held in Firm-sponsored private-label securitization entities, including those in which the Firm has continuing involvement, and those that are consolidated by the Firm. Continuing involvement includes servicing the loans; holding senior interests or subordinated interests; recourse or guarantee arrangements; and derivative transactions. In certain instances, the Firm’s only continuing involvement is servicing the loans. See Securitization activity on page 156 of this Note for further information regarding the Firm’s cash flows with and interests retained in nonconsolidated VIEs, and pages 156–157 of this Note for information on the Firm’s loan sales to U.S. government agencies.



	Principal amount outstanding						JPMorgan Chase interest in securitized assets in nonconsolidated VIEs^(c)(d)(e)
March 31, 2013^(a)(in billions)	Total assets held by securitization VIEs		Assets held in consolidated securitization VIEs		Assets held in nonconsolidated securitization VIEs with continuing involvement		Trading assets		AFS securities		Total interests held by JPMorgan Chase
Securitization-related
Residential mortgage:
Prime and Alt-A	$	101.7	$	1.9	$	76.3	$	0.4	$	—	$	0.4
Subprime	34.6		1.1		31.4		0.1		—		0.1
Option ARMs	25.3		0.2		25.1		—		—		—
Commercial and other^(b)	128.6		—		81.0		1.3		2.7		4.0
Total	$	290.2	$	3.2	$	213.8	$	1.8	$	2.7	$	4.5



	Principal amount outstanding						JPMorgan Chase interest in securitized assets in nonconsolidated VIEs^(c)(d)(e)
December 31, 2012^(a)(in billions)	Total assets held by securitization VIEs		Assets held in consolidated securitization VIEs		Assets held in nonconsolidated securitization VIEs with continuing involvement		Trading assets		AFS securities		Total interests held by JPMorgan Chase
Securitization-related
Residential mortgage:
Prime and Alt-A	$	107.2	$	2.5	$	80.6	$	0.3	$	—	$	0.3
Subprime	34.5		1.3		31.3		0.1		—		0.1
Option ARMs	26.3		0.2		26.1		—		—		—
Commercial and other^(b)	127.8		—		81.8		1.5		2.8		4.3
Total	$	295.8	$	4.0	$	219.8	$	1.9	$	2.8	$	4.7


(a)	Excludes U.S. government agency securitizations. See pages 156–157 of this Note for information on the Firm’s loan sales to U.S. government agencies.


(b)	Consists of securities backed by commercial loans (predominantly real estate) and non-mortgage-related consumer receivables purchased from third parties. The Firm generally does not retain a residual interest in its sponsored commercial mortgage securitization transactions.

(c)

The table above excludes the following: retained servicing (see Note 16 on pages 158–161 of this Form 10-Q for a discussion of MSRs); securities retained from loans sales to U.S. government agencies; interest rate and foreign exchange derivatives primarily used to manage interest rate and foreign exchange risks of securitization entities (See Note 5 on pages 109–119 of this Form 10-Q for further information on derivatives); senior and subordinated securities of $319 million and $94 million, respectively, at March 31, 2013, and $131 million and $45 million, respectively, at December 31, 2012, which the Firm purchased in connection with CIB’s secondary market-making activities.


(d)	Includes interests held in re-securitization transactions.

(e)

As of March 31, 2013, and December 31, 2012, 75% and 74%, respectively, of the Firm’s retained securitization interests, which are carried at fair value, were risk-rated “A” or better, on an S&P-equivalent basis. The retained interests in prime residential mortgages consisted of $177 million and $170 million of investment-grade and $233 million and $171 million of noninvestment-grade retained interests at March 31, 2013, and December 31, 2012, respectively. The retained interests in commercial and other securitizations trusts consisted of $3.9 billion and $4.1 billion of investment-grade and $139 million and $164 million of noninvestment-grade retained interests at March 31, 2013, and December 31, 2012, respectively.

Residential mortgages

For a more detailed description of the Firm’s involvement with residential mortgage securitizations, see Note 16 on page 283 of JPMorgan Chase’s 2012 Annual Report.

At March 31, 2013, and December 31, 2012, the Firm did not consolidate the assets of certain Firm-sponsored residential mortgage securitization VIEs, in which the Firm had continuing involvement, primarily due to the fact that the Firm did not hold an interest in these trusts that could potentially be significant to the trusts. See the table on page 155 of this Note for more information on the consolidated residential mortgage securitizations, and the table on the previous page of this Note for further information on interests held in nonconsolidated residential mortgage securitizations.

Commercial mortgages and other consumer securitizations

CIB originates and securitizes commercial mortgage loans, and engages in underwriting and trading activities involving the securities issued by securitization trusts. For a more detailed description of the Firm’s involvement with commercial mortgage and other consumer securitizations, see Note 16 on page 283 of JPMorgan Chase’s 2012 Annual Report. See the table on the previous page of this Note for more information on the consolidated commercial mortgage securitizations, and the table on the previous page of this Note for further information on interests held in nonconsolidated securitizations.

Re-securitizations

For a more detailed description of JPMorgan Chase’s

participation in re-securitization transactions, see Note 16 on pages 283–284 of JPMorgan Chase’s 2012 Annual Report.

During the three months ended March 31, 2013 and 2012, the Firm transferred $4.2 billion and $2.9 billion , respectively, of securities to agency VIEs, and zero and $241 million, respectively, of securities to private-label VIEs.

As of March 31, 2013, and December 31, 2012, the Firm did not consolidate any agency re-securitizations. As of March 31, 2013, and December 31, 2012, the Firm consolidated $83 million and $76 million, respectively, of assets, and $2 million and $5 million, respectively, of liabilities of private-label re-securitizations. See the table on page 155 of this Note for more information on the consolidated re-securitization transactions.

As of March 31, 2013, and December 31, 2012, total assets (including the notional amount of interest-only securities) of nonconsolidated Firm-sponsored private-label re-securitization entities in which the Firm has continuing involvement were $3.9 billion and $4.6 billion, respectively. At March 31, 2013, and December 31, 2012, the Firm held approximately $1.7 billion and $2.0 billion, respectively, of interests in nonconsolidated agency re-securitization entities, and $21 million and $61 million, respectively, of senior and subordinated interests in nonconsolidated private-label re-securitization entities. See the table on page 152 of this Note for further information on interests held in nonconsolidated securitizations.

Multi-seller conduits

For a more detailed description of JPMorgan Chase’s principal involvement with Firm-administered multi-seller conduits, see Note 16 on pages 284-285 of JPMorgan Chase’s 2012 Annual Report.

In the normal course of business, JPMorgan Chase makes markets in and invests in commercial paper, including commercial paper issued by the Firm-administered multi-seller conduits. The Firm held $3.8 billion and $8.3 billion of the commercial paper issued by the Firm-administered multi-seller conduits at March 31, 2013, and December 31, 2012, which was eliminated in consolidation. The Firm’s investments were not driven by market liquidity and the Firm is not obligated under any agreement to purchase the commercial paper issued by the Firm-administered multi-seller conduits.

Deal-specific liquidity facilities, program-wide liquidity and credit enhancement provided by the Firm have been eliminated in consolidation. The Firm provides lending-related commitments to certain clients of the Firm-administered multi-seller conduits. The unfunded portion of these commitments was $10.9 billion and $10.8 billion at March 31, 2013, and December 31, 2012, respectively, which are reported as off-balance sheet lending-related commitments. For more information on off-balance sheet lending-related commitments, see Note 21 on pages 166–170 of this Form 10-Q.

VIEs associated with investor intermediation activities

Municipal bond vehicles

For a more detailed description of JPMorgan Chase’s principal involvement with municipal bond vehicles, see Note 16 on pages 285–286 of JPMorgan Chase’s 2012 Annual Report.

The Firm’s exposure to nonconsolidated municipal bond VIEs at March 31, 2013, and December 31, 2012, including the ratings profile of the VIEs’ assets, was as follows.



(in billions)	Fair value of assets held by VIEs		Liquidity facilities		Excess/(deficit)^(a)		Maximum exposure
Nonconsolidated municipal bond vehicles
March 31, 2013	$	14.3	$	8.1	$	6.2	$	8.1
December 31, 2012	14.2		8.0		6.2		8.0



	Ratings profile of VIE assets^(b)										Fair value of assets held by VIEs		Wt. avg. expected life of assets (years)
	Investment-grade								Noninvestment- grade
(in billions, except where otherwise noted)	AAA to AAA-		AA+ to AA-		A+ to A-		BBB+ to BBB-		BB+ and below
March 31, 2013	$	3.1	$	11.0	$	0.2	$	—	$	—	$	14.3	5.8
December 31, 2012	3.1		11.0		0.1		—		—		14.2		5.9


(a)	Represents the excess/(deficit) of the fair values of municipal bond assets available to repay the liquidity facilities, if drawn.


(b)	The ratings scale is presented on an S&P-equivalent basis. Prior periods have been reclassified to conform with the current presentation.

Credit-related note and asset swap vehicles

For a more detailed description of JPMorgan Chase’s principal involvement with credit-related note and asset swap vehicles, see Note 16 on pages 286–288 of JPMorgan Chase’s 2012 Annual Report.

Exposure to nonconsolidated credit-related note and asset swap VIEs at March 31, 2013, and December 31, 2012, was as follows.



March 31, 2013 (in billions)	Net derivative receivables		Total exposure		Par value of collateral held by VIEs^(a)
Credit-related notes
Static structure	$	—	$	—	$	6.5
Managed structure	0.5		0.5		5.5
Total credit-related notes	0.5		0.5		12.0
Asset swaps	0.5		0.5		8.6
Total	$	1.0	$	1.0	$	20.6

December 31, 2012 (in billions)	Net derivative receivables		Total exposure		Par value of collateral held by VIEs^(a)
Credit-related notes
Static structure	$	0.5	$	0.5	$	7.3
Managed structure	0.6		0.6		5.6
Total credit-related notes	1.1		1.1		12.9
Asset swaps	0.4		0.4		7.9
Total	$	1.5	$	1.5	$	20.8

(a)

The Firm’s maximum exposure arises through the derivatives executed with the VIEs; the exposure varies over time with changes in the fair value of the derivatives. The Firm relies on the collateral held by the VIEs to pay any amounts due under the derivatives; the vehicles are structured at inception so that the par value of the collateral is expected to be sufficient to pay amounts due under the derivative contracts.

The Firm consolidated credit-related note vehicles with collateral fair values of $435 million and $483 million, at March 31, 2013, and December 31, 2012, respectively. These consolidated VIEs included some that were structured by the Firm where the Firm provides the credit derivative, and some that have been structured by third parties where the Firm is not the credit derivative provider. The Firm consolidated these vehicles, because it held positions in these entities that provided the Firm with control. The Firm did not consolidate any asset swap vehicles at March 31, 2013, and December 31, 2012.

VIEs sponsored by third parties

The Firm also invests in and provides financing and other services to VIEs sponsored by third parties, as described on page 288 of JPMorgan Chase’s 2012 Annual Report.

Consolidated VIE assets and liabilities

The following table presents information on assets and liabilities related to VIEs consolidated by the Firm as of March 31, 2013, and December 31, 2012.



	Assets								Liabilities
March 31, 2013 (in billions)^(a)	Trading assets – debt and equity instruments		Loans		Other^(d)		Total assets^(e)		Beneficial interests in VIE assets^(f)		Other^(g)		Total liabilities
VIE program type
Firm-sponsored credit card trusts	$	—	$	48.4	$	0.7	$	49.1	$	27.9	$	—	$	27.9
Firm-administered multi-seller conduits	—		20.2		0.1		20.3		16.5		—		16.5
Municipal bond vehicles	9.8		—		0.1		9.9		9.2		0.1		9.3
Mortgage securitization entities^(b)	1.1		1.9		—		3.0		2.1		1.0		3.1
Other^(c)	1.0		3.2		1.0		5.2		2.6		0.2		2.8
Total	$	11.9	$	73.7	$	1.9	$	87.5	$	58.3	$	1.3	$	59.6

	Assets								Liabilities
December 31, 2012 (in billions)^(a)	Trading assets – debt and equity instruments		Loans		Other^(d)		Total assets^(e)		Beneficial interests in VIE assets^(f)		Other^(g)		Total liabilities
VIE program type
Firm-sponsored credit card trusts	$	—	$	51.9	$	0.8	$	52.7	$	30.1	$	—	$	30.1
Firm-administered multi-seller conduits	—		25.4		0.1		25.5		17.2		—		17.2
Municipal bond vehicles	9.8		—		0.1		9.9		11.0		—		11.0
Mortgage securitization entities^(b)	1.4		2.0		—		3.4		2.3		1.1		3.4
Other^(c)	0.8		3.4		1.1		5.3		2.6		0.1		2.7
Total	$	12.0	$	82.7	$	2.1	$	96.8	$	63.2	$	1.2	$	64.4


(a)	Excludes intercompany transactions which were eliminated in consolidation.


(b)	Includes residential and commercial mortgage securitizations as well as re-securitizations.


(c)	Primarily comprises student loan securitization entities. The Firm consolidated $3.2 billion and $3.3 billion of student loan securitization entities as of March 31, 2013, and December 31, 2012, respectively.


(d)	Includes assets classified as cash, derivative receivables, AFS securities, and other assets within the Consolidated Balance Sheets.


(e)	The assets of the consolidated VIEs included in the program types above are used to settle the liabilities of those entities. The difference between total assets and total liabilities recognized for consolidated VIEs represents the Firm’s interest in the consolidated VIEs for each program type.

(f)

The interest-bearing beneficial interest liabilities issued by consolidated VIEs are classified in the line item on the Consolidated Balance Sheets titled, “Beneficial interests issued by consolidated variable interest entities.” The holders of these beneficial interests do not have recourse to the general credit of JPMorgan Chase. Included in beneficial interests in VIE assets are long-term beneficial interests of $32.6 billion and $35.0 billion at March 31, 2013, and December 31, 2012, respectively. The maturities of the long-term beneficial interests as of March 31, 2013, were as follows: $9.1 billion under one year, $16.6 billion between one and five years, and $6.9 billion over five years, all respectively.


(g)	Includes liabilities classified as accounts payable and other liabilities in the Consolidated Balance Sheets.

Supplemental information on loan securitizations

The Firm securitizes and sells a variety of loans, including residential mortgage, credit card, automobile, student and commercial (primarily related to real estate) loans, as well as debt securities. The primary purposes of these securitization transactions are to satisfy investor demand and to generate liquidity for the Firm.

Securitization activity

The following table provide information related to the Firm’s securitization activities for the three months ended March 31, 2013 and 2012, related to assets held in JPMorgan Chase-sponsored securitization entities that were not consolidated by the Firm, and where sale accounting was achieved based on the accounting rules in effect at the time of the securitization.



	Three months ended March 31,
	2013				2012
(in millions, except rates)^(a)	Residential mortgage^(d)		Commercial and other		Residential mortgage^(d)(e)		Commercial and other^(f)
Principal securitized	$	616	$	2,206	$	—	$	—
All cash flows during the period:
Proceeds from new securitizations^(b)	$	634	$	2,277	$	—	$	—
Servicing fees collected	127		1		180		1
Purchases of previously transferred financial assets (or the underlying collateral)^(c)	252		—		59		—
Cash flows received on interests	25		64		52		43


(a)	Excludes re-securitization transactions.

(b)

For the three months ended March 31, 2013, $634 million of proceeds from residential mortgage securitizations were received as securities classified in level 2 of the fair value hierarchy. For the three months March 31, 2013, $2.1 billion of proceeds from commercial mortgage securitizations were received as securities classified in level 2 of the fair value hierarchy and $207 million of proceeds from commercial mortgage securitizations were received as cash.


(c)	Includes cash paid by the Firm to reacquire assets from off–balance sheet, nonconsolidated entities – for example, loan repurchases due to representation and warranties and servicer clean-up calls.


(d)	Includes prime, Alt-A, subprime, and option ARMs. Excludes sales for which the Firm did not securitize the loan (including loans sold to Ginnie Mae, Fannie Mae and Freddie Mac).


(e)	There were no residential mortgage securitizations during the three months ended March 31, 2012.


(f)	Includes commercial and student loan securitizations. There were no commercial and other securitizations during the three months ended March 31, 2012.

Loans and excess mortgage servicing rights sold to agencies and other third-party-sponsored securitization entities

In addition to the amounts reported in the securitization activity tables above, the Firm, in the normal course of business, sells originated and purchased mortgage loans and certain originated excess mortgage servicing rights on a nonrecourse basis, predominantly to Ginnie Mae, Fannie Mae and Freddie Mac (the “Agencies”). These loans and excess mortgage servicing rights are sold primarily for the purpose of securitization by the Agencies, which also provide credit enhancement of the loans and excess mortgage servicing rights through certain guarantee provisions. The Firm does not consolidate these securitization vehicles as it is not the primary beneficiary. For a limited number of loan sales, the Firm is obligated to share a portion of the credit risk associated with the sold loans with the purchaser. See Note 29 on pages 308–315 of the Firm’s 2012 Annual Report for additional information about the Firm’s loan sales- and securitization-related indemnifications. See Note 16 on pages 158–161 of this Form 10-Q for additional information about the impact of the Firm’s sale of certain excess mortgage servicing rights.

The following table summarizes the activities related to loans sold to U.S. government-sponsored agencies and third-party-sponsored securitization entities.



	Three months ended March 31,
(in millions)	2013		2012
Carrying value of loans sold^(a)	$	54,880	$	39,808
Proceeds received from loan sales as cash	166		18
Proceeds from loans sales as securities^(b)	54,169		39,255
Total proceeds received from loan sales^(c)	$	54,335	$	39,273
Gains on loan sales^(d)	138		35


(a)	Predominantly to U.S. government agencies.


(b)	Predominantly includes securities from U.S. government agencies that are generally sold shortly after receipt.


(c)	Excludes the value of MSRs retained upon the sale of loans. Gains on loans sales include the value of MSRs.


(d)	The carrying value of the loans accounted for at fair value approximated the proceeds received upon loan sale.

Options to repurchase delinquent loans

In addition to the Firm’s obligation to repurchase certain loans due to material breaches of representations and warranties as discussed in Note 21 on pages 166–170 of this Form 10-Q, the Firm also has the option to repurchase delinquent loans that it services for Ginnie Mae loan pools, as well as for other U.S. government agencies under certain arrangements. The Firm may elect to repurchase delinquent loans from Ginnie Mae loan pools as it continues to service them and/or manage the foreclosure process in accordance with the applicable requirements, and such loans continue to be insured or guaranteed. When the Firm’s repurchase option becomes exercisable, such loans must be reported on the Consolidated Balance Sheets as a loan with a corresponding liability. As of March 31, 2013, and December 31, 2012, the Firm had recorded on its Consolidated Balance Sheets $15.6 billion of loans that either had been repurchased or for which the Firm had an option to repurchase. Predominately all of these amounts relate to loans that have been repurchased from Ginnie Mae loan pools. Additionally, real estate owned resulting from voluntary repurchases of loans was $1.7 billion and $1.6 billion as of March 31, 2013, and December 31, 2012, respectively. Substantially all of these loans and real estate owned are insured or guaranteed by U.S. government agencies and reimbursement is proceeding normally. For additional information, refer to Note 13 on pages 129–149 of this Form 10-Q and Note 14 on pages 250–275 of JPMorgan Chase’s 2012 Annual Report.

JPMorgan Chase’s interest in securitized assets held at fair value

The following table outlines the key economic assumptions used to determine the fair value, as of March 31, 2013, and December 31, 2012, of certain of the Firm’s retained interests in nonconsolidated VIEs (other than MSRs), that are valued using modeling techniques. The table also outlines the sensitivities of those fair values to immediate 10% and 20% adverse changes in assumptions used to determine fair value. For a discussion of MSRs, see Note 16 on pages 158–161 of this Form 10-Q.



	Commercial and other
(in millions, except rates and where otherwise noted)^(a)	March 31, 2013			December 31, 2012
JPMorgan Chase interests in securitized assets	$	1,290		$	1,488
Weighted-average life (in years)	6.3			6.1
Weighted-average discount rate^(b)	4.6		%	4.1		%
Impact of 10% adverse change	$	(31	)	$	(34	)
Impact of 20% adverse change	(62		)	(65		)


(a)	The Firm’s interests in prime mortgage securitizations were $410 million and $341 million, as of March 31, 2013, and December 31, 2012, respectively. These include retained interests in Alt-A loans and re-securitization transactions. The Firm’s interests in subprime mortgage securitizations were $54 million and $68 million, as of March 31, 2013, and December 31, 2012, respectively.


(b)	Incorporates the Firm’s weighted-average loss assumption.

The sensitivity analysis in the preceding table is hypothetical. Changes in fair value based on a 10% or 20% variation in assumptions generally cannot be extrapolated easily, because the relationship of the change in the assumptions to the change in fair value may not be linear. Also, in the table, the effect that a change in a particular assumption may have on the fair value is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which might counteract or magnify the sensitivities. The above sensitivities also do not reflect risk management practices the Firm may undertake to mitigate such risks.

Loan delinquencies and liquidation losses

The table below includes information about components of nonconsolidated securitized financial assets, in which the Firm has continuing involvement, and delinquencies as of March 31, 2013, and December 31, 2012, respectively; and liquidation losses for the three months ended March 31, 2013 and 2012, respectively.



									Liquidation losses
	Securitized assets				90 days past due				Three months ended March 31,
(in millions)	March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012		2013		2012
Securitized loans^(a)
Residential mortgage:
Prime mortgage^(b)	$	76,311	$	80,572	$	14,923	$	16,270	$	1,238	$	1,699
Subprime mortgage	31,407		31,264		10,341		10,570		783		801
Option ARMs	25,125		26,095		6,028		6,595		411		616
Commercial and other	80,943		81,834		4,391		4,077		146		229
Total loans securitized^(c)	$	213,786	$	219,765	$	35,683	$	37,512	$	2,578	$	3,345

(a)

Total assets held in securitization-related SPEs were $290.2 billion and $295.8 billion, respectively, at March 31, 2013, and December 31, 2012. The $213.8 billion and $219.8 billion, respectively, of loans securitized at March 31, 2013, and December 31, 2012, excluded: $73.2 billion and $72.0 billion, respectively, of securitized loans in which the Firm has no continuing involvement, and $3.2 billion and $4.0 billion, respectively, of loan securitizations consolidated on the Firm’s Consolidated Balance Sheets at March 31, 2013, and December 31, 2012.


(b)	Includes Alt-A loans.


(c)	Includes securitized loans that were previously recorded at fair value and classified as trading assets.