XML 47 R22.htm IDEA: XBRL DOCUMENT

Variable Interest Entities

12 Months Ended

Dec. 31, 2018

Variable Interest Entities [Abstract]

Variable interest entities

For a further description of JPMorgan Chase’s accounting policies regarding consolidation of VIEs, refer to Note 1. Page 198

The following table summarizes the most significant types of Firm-sponsored VIEs by business segment. The Firm considers a “sponsored” VIE to include any entity where: (1) JPMorgan Chase is the primary beneficiary of the structure; (2) the VIE is used by JPMorgan Chase to securitize Firm assets; (3) the VIE issues financial instruments with the JPMorgan Chase name; or (4) the entity is a JPMorgan Chase–administered asset-backed commercial paper conduit.



Line of Business	Transaction Type	Activity	2018 Form 10-K page references
CCB	Credit card securitization trusts	Securitization of originated credit card receivables	244-245
CCB	Mortgage securitization trusts	Servicing and securitization of both originated and purchased residential mortgages	245-247
CIB	Mortgage and other securitization trusts	Securitization of both originated and purchased residential and commercial mortgages, and other consumer loans	245-247
	Multi-seller conduits	Assist clients in accessing the financial markets in a cost-efficient manner and structures transactions to meet investor needs	247
	Municipal bond vehicles	Financing of municipal bond investments	247-248

The Firm’s other business segments are also involved with VIEs (both third-party and Firm-sponsored), but to a lesser extent, as follows:

•

Asset & Wealth Management: AWM sponsors and manages certain funds that are deemed VIEs. As asset manager of the funds, AWM earns a fee based on assets managed; the fee varies with each fund’s investment objective and is competitively priced. For fund entities that qualify as VIEs, AWM’s interests are, in certain cases, considered to be significant variable interests that result in consolidation of the financial results of these entities.

•

Commercial Banking: CB provides financing and lending-related services to a wide spectrum of clients, including certain third-party-sponsored entities that may meet the definition of a VIE. CB does not control the activities of these entities and does not consolidate these entities. CB’s maximum loss exposure, regardless of whether the entity is a VIE, is generally limited to loans and lending-related commitments which are reported and disclosed in the same manner as any other third-party transaction.

•

Corporate: Corporate is involved with entities that may meet the definition of VIEs; however these entities are generally subject to specialized investment company accounting, which does not require the consolidation of investments, including VIEs. In addition, Treasury and CIO invest in securities generally issued by third parties which may meet the definition of VIEs (e.g., issuers of asset-backed securities). In general, the Firm does not have the power to direct the significant activities of these entities and therefore does not consolidate these entities. Refer to Note 10 for further information on the Firm’s investment securities portfolio.

In addition, CIB also invests in and provides financing and other services to VIEs sponsored by third parties. Refer to page 249 of this Note for more information on the VIEs sponsored by third parties.

Significant Firm-sponsored variable interest entities

Credit card securitizations

CCB’s Card business securitizes originated credit card loans, primarily through the Chase Issuance Trust (the “Trust”). The Firm’s continuing involvement in credit card securitizations includes servicing the receivables, retaining an undivided seller’s interest in the receivables, retaining certain senior and subordinated securities and maintaining escrow accounts.

The Firm is considered to be the primary beneficiary of these Firm-sponsored credit card securitization trusts based on the Firm’s ability to direct the activities of these VIEs through its servicing responsibilities and other duties, including making decisions as to the receivables that are transferred into those trusts and as to any related modifications and workouts. Additionally, the nature and extent of the Firm’s other continuing involvement with the trusts, as indicated above, obligates the Firm to absorb

losses and gives the Firm the right to receive certain benefits from these VIEs that could potentially be significant.

The underlying securitized credit card receivables and other assets of the securitization trusts are available only for payment of the beneficial interests issued by the securitization trusts; they are not available to pay the Firm’s other obligations or the claims of the Firm’s creditors.

The agreements with the credit card securitization trusts require the Firm to maintain a minimum undivided interest in the credit card trusts (generally 5%). As of December 31, 2018 and 2017, the Firm held undivided interests in Firm-sponsored credit card securitization trusts of $15.1 billion and $15.8 billion, respectively. The Firm maintained an average undivided interest in principal receivables owned by those trusts of approximately 37% and 26% for the years ended December 31, 2018 and 2017. The Firm did

not retain any senior securities and retained $3.0 billion and $4.5 billion of subordinated securities in certain of its credit card securitization trusts as of December 31, 2018 and 2017, respectively. The Firm’s undivided interests in the credit card trusts and securities retained are eliminated in consolidation.

Firm-sponsored mortgage and other securitization trusts

The Firm securitizes (or has securitized) originated and purchased residential mortgages, commercial mortgages and other consumer loans primarily in its CCB and CIB 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 interests in the securitization trusts.

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 (including amounts required to be held pursuant to credit risk retention rules), recourse or guarantee arrangements, and derivative contracts. In certain instances, the Firm’s only continuing involvement is servicing the loans. Refer to Securitization activity on page 250 of this Note for further information regarding the Firm’s cash flows associated with and interests retained in nonconsolidated VIEs, and pages 250-251 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)
December 31, 2018 (in millions)	Total assets held by securitization VIEs		Assets held in consolidated securitization VIEs		Assets held in nonconsolidated securitization VIEs with continuing involvement		Trading assets		Investment securities		Other financial assets		Total interests held by JPMorgan Chase
Securitization-related^(a)
Residential mortgage:
Prime/Alt-A and option ARMs	$	63,350	$	3,237	$	50,679	$	623	$	647	$	—	$	1,270
Subprime	16,729		32		15,434		53		—		—		53
Commercial and other^(b)	102,961		—		79,387		783		801		210		1,794
Total	$	183,040	$	3,269	$	145,500	$	1,459	$	1,448	$	210	$	3,117



	Principal amount outstanding						JPMorgan Chase interest in securitized assets in nonconsolidated VIEs^(c)(d)(e)
December 31, 2017(in millions)	Total assets held by securitization VIEs		Assets held in consolidated securitization VIEs		Assets held in nonconsolidated securitization VIEs with continuing involvement		Trading assets		Investment securities		Other financial assets		Total interests held by JPMorgan Chase
Securitization-related^(a)
Residential mortgage:
Prime/Alt-A and option ARMs	$	68,874	$	3,615	$	52,280	$	410	$	943	$	—	$	1,353
Subprime	18,984		7		17,612		93		—		—		93
Commercial and other^(b)	94,905		63		63,411		745		1,133		157		2,035
Total	$	182,763	$	3,685	$	133,303	$	1,248	$	2,076	$	157	$	3,481


(a)	Excludes U.S. government agency securitizations and re-securitizations, which are not Firm-sponsored. Refer to pages 250-251 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.

(c)

Excludes the following: retained servicing (refer to Note 15 for a discussion of MSRs); securities retained from loan 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 (refer to Note 5 for further information on derivatives); senior and subordinated securities of $87 million and $28 million, respectively, at December 31, 2018, and $88 million and $48 million, respectively, at December 31, 2017, which the Firm purchased in connection with CIB’s secondary market-making activities.


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

(e)

As of December 31, 2018 and 2017, 60% and 61%, respectively, of the Firm’s retained securitization interests, which are predominantly carried at fair value and include amounts required to be held pursuant to credit risk retention rules, were risk-rated “A” or better, on an S&P-equivalent basis. The retained interests in prime residential mortgages consisted of $1.3 billion of investment-grade for both periods, and $16 million and $48 million of noninvestment-grade at December 31, 2018 and 2017, respectively. The retained interests in commercial and other securitizations trusts consisted of $1.2 billion and $1.6 billion of investment-grade and $623 million and $412 million of noninvestment-grade retained interests at December 31, 2018 and 2017, respectively.

Residential mortgage

The Firm securitizes residential mortgage loans originated by CCB, as well as residential mortgage loans purchased from third parties by either CCB or CIB. CCB generally retains servicing for all residential mortgage loans it originated or purchased, and for certain mortgage loans purchased by CIB. For securitizations of loans serviced by CCB, the Firm has the power to direct the significant activities of the VIE because it is responsible for decisions related to loan modifications and workouts. CCB may also retain an interest upon securitization.

In addition, CIB engages in underwriting and trading activities involving securities issued by Firm-sponsored securitization trusts. As a result, CIB at times retains senior and/or subordinated interests (including residual interests and amounts required to be held pursuant to credit risk retention rules) in residential mortgage securitizations at the time of securitization, and/or reacquires positions in the secondary market in the normal course of business. In certain instances, as a result of the positions retained or reacquired by CIB or held by CCB, when considered together with the servicing arrangements entered into by CCB, the Firm is deemed to be the primary beneficiary of certain securitization trusts. Refer to the table on page 248 of this Note for more information on consolidated residential mortgage securitizations.

The Firm does not consolidate a residential mortgage securitization (Firm-sponsored or third-party-sponsored) when it is not the servicer (and therefore does not have the power to direct the most significant activities of the trust) or does not hold a beneficial interest in the trust that could potentially be significant to the trust. Refer to the table on page 248 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. CIB may retain unsold senior and/or subordinated interests (including amounts required to be held pursuant to credit risk retention rules) in commercial mortgage securitizations at the time of securitization but, generally, the Firm does not service commercial loan securitizations. For commercial mortgage securitizations the power to direct the significant activities of the VIE generally is held by the servicer or investors in a specified class of securities (“controlling class”). The Firm generally does not retain an interest in the controlling class in its sponsored commercial mortgage securitization transactions. Refer to the table on page 248 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

The Firm engages in certain re-securitization transactions in which debt securities are transferred to a VIE in exchange for new beneficial interests. These transfers occur in connection with both agency (Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) and Government National Mortgage Association (“Ginnie Mae”)) and nonagency (private-label) sponsored VIEs, which may be backed by either residential or commercial mortgages. The Firm’s consolidation analysis is largely dependent on the Firm’s role and interest in the re-securitization trusts.

The following table presents the principal amount of securities transferred to re-securitization VIEs.



Year ended December 31, (in millions)	2018		2017		2016
Transfers of securities to VIEs
Firm-sponsored private-label	$	—	$	—	$	647
Agency	15,532		12,617		11,241

Most re-securitizations with which the Firm is involved are client-driven transactions in which a specific client or group of clients is seeking a specific return or risk profile. For these transactions, the Firm has concluded that the decision-making power of the entity is shared between the Firm and its clients, considering the joint effort and decisions in establishing the re-securitization trust and its assets, as well as the significant economic interest the client holds in the re-securitization trust; therefore the Firm does not consolidate the re-securitization VIE.

In more limited circumstances, the Firm creates a nonagency re-securitization trust independently and not in conjunction with specific clients. In these circumstances, the Firm is deemed to have the unilateral ability to direct the most significant activities of the re-securitization trust because of the decisions made during the establishment and design of the trust; therefore, the Firm consolidates the re-securitization VIE if the Firm holds an interest that could potentially be significant.

Additionally, the Firm may invest in beneficial interests of third-party-sponsored re-securitizations and generally purchases these interests in the secondary market. In these circumstances, the Firm does not have the unilateral ability to direct the most significant activities of the re-securitization trust, either because it was not involved in the initial design of the trust, or the Firm is involved with an independent third-party sponsor and demonstrates shared power over the creation of the trust; therefore, the Firm does not consolidate the re-securitization VIE.

The following table presents information on nonconsolidated re-securitization VIEs.



	Nonconsolidated re-securitization VIEs
December 31, (in millions)	2018		2017
Firm-sponsored private-label
Assets held in VIEs with continuing involvement^(a)	$	118	$	783
Interest in VIEs	10		29
Agency
Interest in VIEs	3,058		2,250


(a)	Represents the principal amount and includes the notional amount of interest-only securities.

As of December 31, 2018 and 2017, the Firm did not consolidate any agency re-securitization VIEs or any Firm-sponsored private-label re-securitization VIEs.

Multi-seller conduits

Multi-seller conduit entities are separate bankruptcy remote entities that provide secured financing, collateralized by pools of receivables and other financial assets, to customers of the Firm. The conduits fund their financing facilities through the issuance of highly rated commercial paper. The primary source of repayment of the commercial paper is the cash flows from the pools of assets. In most instances, the assets are structured with deal-specific credit enhancements provided to the conduits by the customers (i.e., sellers) or other third parties. Deal-specific credit enhancements are generally structured to cover a multiple of historical losses expected on the pool of assets, and are typically in the form of overcollateralization provided by the seller. The deal-specific credit enhancements mitigate the Firm’s potential losses on its agreements with the conduits.

To ensure timely repayment of the commercial paper, and to provide the conduits with funding to provide financing to customers in the event that the conduits do not obtain funding in the commercial paper market, each asset pool financed by the conduits has a minimum 100% deal-specific liquidity facility associated with it provided by JPMorgan Chase Bank, N.A. JPMorgan Chase Bank, N.A. also provides the multi-seller conduit vehicles with uncommitted program-wide liquidity facilities and program-wide credit enhancement in the form of standby letters of credit. The amount of program-wide credit enhancement required is based upon commercial paper issuance and approximates 10% of the outstanding balance of commercial paper.

The Firm consolidates its Firm-administered multi-seller conduits, as the Firm has both the power to direct the significant activities of the conduits and a potentially significant economic interest in the conduits. As administrative agent and in its role in structuring transactions, the Firm makes decisions regarding asset types and credit quality, and manages the commercial paper funding needs of the conduits. The Firm’s interests that could potentially be significant to the VIEs include the fees received as administrative agent and liquidity and

program-wide credit enhancement provider, as well as the potential exposure created by the liquidity and credit enhancement facilities provided to the conduits. Refer to page 248 of this Note for further information on consolidated VIE assets and liabilities.

In the normal course of business, JPMorgan Chase makes markets in and invests in commercial paper issued by the Firm-administered multi-seller conduits. The Firm held $20.1 billion and $20.4 billion of the commercial paper issued by the Firm-administered multi-seller conduits at December 31, 2018 and 2017, respectively, which have been eliminated in consolidation. The Firm’s investments reflect the Firm’s funding needs and capacity and were not driven by market illiquidity. Other than the amounts required to be held pursuant to credit risk retention rules, 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 or the Firm-administered multi-seller conduits provide lending-related commitments to certain clients of the Firm-administered multi-seller conduits. The unfunded commitments were $8.0 billion and $8.8 billion at December 31, 2018 and 2017, respectively, and are reported as off-balance sheet lending-related commitments. For more information on off-balance sheet lending-related commitments, refer to Note 27.

Municipal bond vehicles

Municipal bond vehicles or tender option bond (“TOB”) trusts allow institutions to finance their municipal bond investments at short-term rates. In a typical TOB transaction, the trust purchases highly rated municipal bond(s) of a single issuer and funds the purchase by issuing two types of securities: (1) puttable floating-rate certificates (“floaters”) and (2) inverse floating-rate residual interests (“residuals”). The floaters are typically purchased by money market funds or other short-term investors and may be tendered, with requisite notice, to the TOB trust. The residuals are retained by the investor seeking to finance its municipal bond investment. TOB transactions where the residual is held by a third-party investor are typically known as customer TOB trusts, and non-customer TOB trusts are transactions where the Residual is retained by the Firm. Customer TOB trusts are sponsored by a third party; refer to page 249 on this Note for further information. The Firm serves as sponsor for all non-customer TOB transactions. The Firm may provide various services to a TOB trust, including remarketing agent, liquidity or tender option provider, and/or sponsor.

J.P. Morgan Securities LLC may serve as a remarketing agent on the floaters for TOB trusts. The remarketing agent is responsible for establishing the periodic variable rate on the floaters, conducting the initial placement and remarketing tendered floaters. The remarketing agent may,

but is not obligated to, make markets in floaters. Floaters held by the Firm were not material during 2018 and 2017.

JPMorgan Chase Bank, N.A. or J.P. Morgan Securities LLC often serves as the sole liquidity or tender option provider for the TOB trusts. The liquidity provider’s obligation to perform is conditional and is limited by certain events (“Termination Events”), which include bankruptcy or failure to pay by the municipal bond issuer or credit enhancement provider, an event of taxability on the municipal bonds or the immediate downgrade of the municipal bond to below investment grade. In addition, the liquidity provider’s exposure is typically further limited by the high credit quality of the underlying municipal bonds, the excess collateralization in the vehicle, or, in certain transactions, the reimbursement agreements with the Residual holders.

Holders of the floaters may “put,” or tender, their floaters to the TOB trust. If the remarketing agent cannot successfully remarket the floaters to another investor, the liquidity provider either provides a loan to the TOB trust for the TOB trust’s purchase of the floaters, or it directly purchases the tendered floaters.

TOB trusts are considered to be variable interest entities. The Firm consolidates Non-Customer TOB trusts because as the Residual holder, the Firm has the right to make decisions that significantly impact the economic performance of the municipal bond vehicle, and it has the right to receive benefits and bear losses that could potentially be significant to the municipal bond vehicle.

Consolidated VIE assets and liabilities

The following table presents information on assets and liabilities related to VIEs consolidated by the Firm as of December 31, 2018 and 2017.



	Assets								Liabilities
December 31, 2018 (in millions)	Trading assets		Loans		Other^(b)		Total assets^(c)		Beneficial interests in VIE assets^(d)		Other^(e)		Total liabilities
VIE program type
Firm-sponsored credit card trusts	$	—	$	31,760	$	491	$	32,251	$	13,404	$	12	$	13,416
Firm-administered multi-seller conduits	—		24,411		300		24,711		4,842		33		4,875
Municipal bond vehicles	1,779		—		4		1,783		1,685		3		1,688
Mortgage securitization entities^(a)	53		3,285		40		3,378		308		161		469
Other	134		—		178		312		2		103		105
Total	$	1,966	$	59,456	$	1,013	$	62,435	$	20,241	$	312	$	20,553

	Assets								Liabilities
December 31, 2017 (in millions)	Trading assets		Loans		Other^(b)		Total assets^(c)		Beneficial interests in VIE assets^(d)		Other^(e)		Total liabilities
VIE program type
Firm-sponsored credit card trusts	$	—	$	41,923	$	652	$	42,575	$	21,278	$	16	$	21,294
Firm-administered multi-seller conduits	—		23,411		48		23,459		3,045		28		3,073
Municipal bond vehicles	1,278		—		3		1,281		1,265		2		1,267
Mortgage securitization entities^(a)	66		3,661		55		3,782		359		199		558
Other	105		—		1,916		2,021		134		104		238
Total	$	1,449	$	68,995	$	2,674	$	73,118	$	26,081	$	349	$	26,430


(a)	Includes residential and commercial mortgage securitizations.


(b)	Includes assets classified as cash and other assets on the Consolidated balance sheets.


(c)	The assets of the consolidated VIEs included in the program types above are used to settle the liabilities of those entities. The assets and liabilities include third-party assets and liabilities of consolidated VIEs and exclude intercompany balances that eliminate in consolidation.

(d)

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 generally do not have recourse to the general credit of JPMorgan Chase. Included in beneficial interests in VIE assets are long-term beneficial interests of $13.7 billion and $21.8 billion at December 31, 2018 and 2017, respectively. For additional information on interest-bearing long-term beneficial interests, refer to Note 19.


(e)	Includes liabilities classified as accounts payable and other liabilities on the Consolidated balance sheets.

VIEs sponsored by third parties

The Firm enters into transactions with VIEs structured by other parties. These include, for example, acting as a derivative counterparty, liquidity provider, investor, underwriter, placement agent, remarketing agent, trustee or custodian. These transactions are conducted at arm’s-length, and individual credit decisions are based on the analysis of the specific VIE, taking into consideration the quality of the underlying assets. Where the Firm does not have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, or a variable interest that could potentially be significant, the Firm generally does not consolidate the VIE, but it records and reports these positions on its Consolidated balance sheets in the same manner it would record and report positions in respect of any other third-party transaction.

Tax credit vehicles

The Firm holds investments in unconsolidated tax credit vehicles, which are limited partnerships and similar entities that construct, own and operate affordable housing, alternative energy, and other projects. These entities are primarily considered VIEs. A third party is typically the general partner or managing member and has control over the significant activities of the tax credit vehicles, and accordingly the Firm does not consolidate tax credit vehicles. The Firm generally invests in these partnerships as a limited partner and earns a return primarily through the receipt of tax credits allocated to the projects. The maximum loss exposure, represented by equity investments and funding commitments, was $16.5 billion and $13.4 billion, of which $4.0 billion and $3.2 billion was unfunded at December 31, 2018 and 2017, respectively. In order to reduce the risk of loss, the Firm assesses each project and withholds varying amounts of its capital investment until the project qualifies for tax credits. Refer to Note 24 for further information on affordable housing tax credits. For more information on off-balance sheet lending-related commitments, refer to Note 27.

Customer municipal bond vehicles (TOB trusts)

The Firm may provide various services to Customer TOB trusts, including remarketing agent, liquidity or tender option provider. In certain Customer TOB transactions, the Firm, as liquidity provider, has entered into a reimbursement agreement with the Residual holder. In those transactions, upon the termination of the vehicle, the Firm has recourse to the third-party Residual holders for any shortfall. The Firm does not have any intent to protect Residual holders from potential losses on any of the underlying municipal bonds. The Firm does not consolidate Customer TOB trusts, since the Firm does not have the power to make decisions that significantly impact the economic performance of the municipal bond vehicle. The Firm’s maximum exposure as a liquidity provider to Customer TOB trusts at December 31, 2018 and 2017, was $4.8 billion and $5.3 billion, respectively. The fair value of assets held by such VIEs at December 31, 2018 and 2017 was $7.7 billion and $9.2 billion, respectively. For more

information on off-balance sheet lending-related commitments, refer to Note 27.

Loan securitizations

The Firm has securitized and sold a variety of loans, including residential mortgage, credit card, and commercial mortgage. The purposes of these securitization transactions were to satisfy investor demand and to generate liquidity for the Firm.

For loan securitizations in which the Firm is not required to consolidate the trust, the Firm records the transfer of the loan receivable to the trust as a sale when all of the following accounting criteria for a sale are met: (1) the transferred financial assets are legally isolated from the Firm’s creditors; (2) the transferee or beneficial interest holder can pledge or exchange the transferred financial assets; and (3) the Firm does not maintain effective control over the transferred financial assets (e.g., the Firm cannot repurchase the transferred assets before their maturity and it does not have the ability to unilaterally cause the holder to return the transferred assets).

For loan securitizations accounted for as a sale, the Firm recognizes a gain or loss based on the difference between the value of proceeds received (including cash, beneficial interests, or servicing assets received) and the carrying value of the assets sold. Gains and losses on securitizations are reported in noninterest revenue.

Securitization activity

The following table provides information related to the Firm’s securitization activities for the years ended December 31, 2018, 2017 and 2016, related to assets held in Firm-sponsored securitization entities that were not consolidated by the Firm, and where sale accounting was achieved at the time of the securitization.



	2018				2017				2016
Year ended December 31, (in millions)	Residential mortgage^(f)		Commercial and other^(g)		Residential mortgage^(f)		Commercial and other^(g)		Residential mortgage^(f)		Commercial and other^(g)
Principal securitized	$	6,431	$	10,159	$	5,532	$	10,252	$	1,817	$	8,964
All cash flows during the period:^(a)
Proceeds received from loan sales as financial instruments^(b)(c)	$	6,449	$	10,218	$	5,661	$	10,340	$	1,831	$	9,094
Servicing fees collected^(d)	319		2		338		3		477		3
Purchases of previously transferred financial assets (or the underlying collateral)^(e)	—		—		1		—		37		—
Cash flows received on interests	411		301		463		918		482		1,441


(a)	Excludes re-securitization transactions.


(b)	Predominantly includes Level 2 assets.


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


(d)	The prior period amounts have been revised to conform with the current period presentation.


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


(f)	Includes prime mortgages only. Excludes certain loan securitization transactions entered into with Ginnie Mae, Fannie Mae and Freddie Mac.


(g)	Includes commercial mortgage and other consumer loans.

Key assumptions used to value retained interests originated during the year are shown in the table below.



Year ended December 31,	2018		2017		2016
Residential mortgage retained interest:
Weighted-average life (in years)	7.6		4.8		4.5
Weighted-average discount rate	3.6	%	2.9	%	4.2	%
Commercial mortgage retained interest:
Weighted-average life (in years)	5.3		7.1		6.2
Weighted-average discount rate	4.0	%	4.4	%	5.8	%

Loans and excess MSRs sold to U.S. government-sponsored enterprises, loans in securitization transactions pursuant to Ginnie Mae guidelines, 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 MSRs on a nonrecourse basis, predominantly to U.S. government-sponsored enterprises (“U.S. GSEs”). These loans and excess MSRs are sold primarily for the purpose of securitization by the U.S. GSEs, who provide certain guarantee provisions (e.g., credit enhancement of the loans). The Firm also sells loans into securitization transactions pursuant to Ginnie Mae guidelines; these loans are typically insured or guaranteed by another U.S. government agency. The Firm does not consolidate the securitization vehicles underlying these transactions 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. Refer to Note 27 for additional information about the Firm’s loan sales and securitization-related indemnifications. Refer to Note 15 for additional information about the impact of the Firm’s sale of certain excess MSRs.

The following table summarizes the activities related to loans sold to the U.S. GSEs, loans in securitization transactions pursuant to Ginnie Mae guidelines, and other third-party-sponsored securitization entities.



Year ended December 31, (in millions)	2018			2017		2016
Carrying value of loans sold	$	44,609		$	64,542	$	52,869
Proceeds received from loan sales as cash	$	9		$	117	$	592
Proceeds from loans sales as securities^(a)	43,671			63,542		51,852
Total proceeds received from loan sales^(b)	$	43,680		$	63,659	$	52,444
Gains/(losses) on loan sales^(c)(d)	$	(93	)	$	163	$	222


(a)	Predominantly includes securities from U.S. GSEs and Ginnie Mae that are generally sold shortly after receipt.


(b)	Excludes the value of MSRs retained upon the sale of loans.


(c)	Gains/(losses) on loan 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 27, 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 typically elects to repurchase delinquent loans from Ginnie Mae loan pools as it continues to service them and/or manage th

e 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. For additional information, refer to Note 12.

The following table presents loans the Firm repurchased or had an option to repurchase, real estate owned, and foreclosed government-guaranteed residential mortgage loans recognized on the Firm’s Consolidated balance sheets as of December 31, 2018 and 2017. Substantially all of these loans and real estate are insured or guaranteed by U.S. government agencies.


(a)	Predominantly all of these amounts relate to loans that have been repurchased from Ginnie Mae loan pools.


(b)	Relates to voluntary repurchases of loans, which are included in accrued interest and accounts receivable.

Loan delinquencies and liquidation losses

The table below includes information about components of nonconsolidated securitized financial assets held in Firm-sponsored private-label securitization entities, in which the Firm has continuing involvement, and delinquencies as of December 31, 2018 and 2017.



	Securitized assets				90 days past due				Net liquidation losses^(a)
As of or for the year ended December 31, (in millions)	2018		2017		2018		2017		2018			2017
Securitized loans
Residential mortgage:
Prime/ Alt-A & option ARMs	$	50,679	$	52,280	$	3,354	$	4,870	$	610		$	790
Subprime	15,434		17,612		2,478		3,276		(169		)	719
Commercial and other	79,387		63,411		225		957		280			114
Total loans securitized	$	145,500	$	133,303	$	6,057	$	9,103	$	721		$	1,623

(a)

Includes liquidation gains as a result of private label mortgage settlement payments during the first quarter of 2018, which were reflected as asset recoveries by trustees.

December 31,
(in millions)

Loans repurchased or option to repurchase^(a)

Real estate owned

Foreclosed government-guaranteed residential mortgage loans^(b)