Variable Interest Entities

9 Months Ended

Sep. 30, 2019

Variable Interest Entities [Abstract]

Variable Interest Entities

Variable interest entities

Refer to Note 1 of JPMorgan Chase’s 2018 Form 10-K for a further description of JPMorgan Chase’s accounting policies regarding consolidation of VIEs.

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 originated credit card receivables	139
	Mortgage securitization trusts	Servicing and securitization of both originated and purchased residential mortgages	139-141
CIB	Mortgage and other securitization trusts	Securitization of both originated and purchased residential and commercial mortgages, and other consumer loans	139-141
	Multi-seller conduits	Assist clients in accessing the financial markets in a cost-efficient manner and structures transactions to meet investor needs	141
	Municipal bond vehicles	Financing of municipal bond investments	141

The Firm also invests in and provides financing and other services to VIEs sponsored by third parties. Refer to pages 142–143 of this Note for more information on the VIEs sponsored by third parties.

Significant Firm-sponsored VIEs

Credit card securitizations

Refer to Note 14 of JPMorgan Chase’s 2018 Form 10-K for a more detailed discussion of JPMorgan Chase’s involvement with credit card securitizations.

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, including its primary vehicle, the Chase Issuance Trust. Refer to the table on page 142 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 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.

Refer to Note 14 of JPMorgan Chase’s 2018 Form 10-K 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.

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 143 of this Note for further information regarding the Firm’s cash flows associated with and interests retained in nonconsolidated VIEs, and pages 143–144 of this Note for information on the Firm’s loan sales and securitization activity related to U.S. GSEs and government agencies.

	Principal amount outstanding						JPMorgan Chase interest in securitized assets in nonconsolidated VIEs(c)(d)(e)
September 30, 2019 (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	$	61,480	$	2,966	$	49,826	$	522	$	728	$	—	$	1,250
Subprime	15,156		—		14,085		16		—		—		16
Commercial and other(b)	101,624		—		86,302		919		708		234		1,861
Total	$	178,260	$	2,966	$	150,213	$	1,457	$	1,436	$	234	$	3,127

	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

(a) Excludes U.S. GSEs and government agency securitizations and re-securitizations, which are not Firm-sponsored. Refer to pages 143–144 of this Note for information on the Firm’s loan sales and securitization activity related to U.S. GSEs and government agencies.

(b) Consists of securities backed by commercial real estate loans and non-mortgage-related consumer receivables purchased from third parties.

(c) Excludes the following: retained servicing (refer to Note 14 for a discussion of MSRs); securities retained from loan sales and securitization activity related to U.S. GSEs and government agencies; interest rate and foreign exchange derivatives primarily used to manage interest rate and foreign exchange risks of securitization entities (Refer to Note 4 for further information on derivatives); senior and subordinated securities of $168 million and $69 million, respectively, at September 30, 2019, and $87 million and $28 million, respectively, at December 31, 2018, which the Firm purchased in connection with CIB’s secondary market-making activities.

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

(e) As of September 30, 2019, and December 31, 2018, 67% and 60%, 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 $1.2 billion and $1.3 billion of investment-grade, and $55 million and $16 million of noninvestment-grade at September 30, 2019, and December 31, 2018, respectively. The retained interests in commercial and other securitizations trusts consisted of $1.3 billion and $1.2 billion of investment-grade retained interests at September 30, 2019 and December 31, 2018, and $567 million and $623 million of noninvestment-grade retained interests at September 30, 2019, and December 31, 2018, 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. Refer to Note 14 of JPMorgan Chase’s 2018 Form 10-K for a more detailed description of the Firm’s involvement with residential mortgage securitizations. Refer to the table on page 142 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. Refer to Note 14 of JPMorgan Chase’s 2018 Form 10-K for a more detailed description of the Firm’s involvement with commercial mortgage and other consumer securitizations. Refer to the table on page 142 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

Refer to Note 14 of JPMorgan Chase’s 2018 Form 10-K for a more detailed description of JPMorgan Chase’s participation in certain re-securitization transactions.

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

	Three months ended September 30,				Nine months ended September 30,
(in millions)	2019		2018		2019		2018
Transfers of securities to VIEs
U.S. GSEs and government agencies	$	5,377	$	2,540	$	12,444	$	11,321

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

	Nonconsolidated re-securitization VIEs
(in millions)	September 30, 2019		December 31, 2018
Firm-sponsored private-label
Assets held in VIEs with continuing involvement(a)	$	21	$	118
Interest in VIEs	—		10
U.S. GSEs and government agencies
Interest in VIEs	2,097		3,058

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

As of September 30, 2019, and December 31, 2018, the Firm did not consolidate any U.S. GSE and government agency re-securitization VIEs or any Firm-sponsored private-label re-securitization VIEs.

Multi-seller conduits

Refer to Note 14 of JPMorgan Chase’s 2018 Form 10-K for a more detailed description of JPMorgan Chase’s principal involvement with Firm-administered multi-seller conduits.

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 $12.6 billion and $20.1 billion of the commercial paper issued by the Firm-administered multi-seller conduits at September 30, 2019, and December 31, 2018, 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 $8.5 billion and $8.0 billion at September 30, 2019, and December 31, 2018, respectively, and are reported as off-balance sheet lending-related commitments in other unfunded commitments to extend credit. Refer to Note 22 for more information on off-balance sheet lending-related commitments.

Municipal bond vehicles

Municipal bond vehicles or tender option bond (“TOB”) trusts allow institutions to finance their municipal bond investments at short-term rates. TOB transactions are known as customer TOB trusts and non-customer TOB trusts. Customer TOB trusts are sponsored by a third party, refer to pages 142–143 of this Note for further information.

The Firm serves as sponsor for all non-customer TOB transactions. Refer to Note 14 of JPMorgan Chase’s 2018 Form 10-K for a more detailed description of JPMorgan Chase’s Municipal bond vehicles.

Consolidated VIE assets and liabilities

The following table presents information on assets and liabilities related to VIEs consolidated by the Firm as of September 30, 2019, and December 31, 2018.

	Assets								Liabilities
September 30, 2019 (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	$	—	$	27,377	$	370	$	27,747	$	6,457	$	6	$	6,463
Firm-administered multi-seller conduits	3		22,708		334		23,045		10,514		35		10,549
Municipal bond vehicles	1,280		—		3		1,283		1,249		2		1,251
Mortgage securitization entities(a)	70		2,937		58		3,065		295		137		432
Other	108		—		209		317		—		121		121
Total	$	1,461	$	53,022	$	974	$	55,457	$	18,515	$	301	$	18,816
	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

(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. Refer to note 14 of JPMorgan Chase’s 2018 Form 10-K for conduits program-wide credit enhancements. Included in beneficial interests in VIE assets are long-term beneficial interests of $6.8 billion and $13.7 billion at September 30, 2019, and December 31, 2018.

(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, wind, solar and other alternative energy 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 $17.0 billion and $16.5 billion, of which $4.8 billion and $4.0 billion was unfunded at September 30, 2019 and December 31, 2018, 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 of JPMorgan Chase’s 2018 Form 10-K for further information on affordable housing tax credits. Refer to Note 22 of this Form 10-Q for more information on off-balance sheet lending-related commitments.

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 September 30, 2019 and

December 31, 2018 was $5.3 billion and $4.8 billion, respectively. The fair value of assets held by such VIEs at September 30, 2019 and December 31, 2018, was $8.6 billion and $7.7 billion, respectively. Refer to Note 22 for more information on off-balance sheet lending-related commitments.

Loan securitizations

The Firm has securitized and sold a variety of loans, including residential mortgage, credit card, and commercial mortgage. Refer to Note 14 of JPMorgan Chase’s 2018 Form 10-K for a further description of the Firm’s accounting policies regarding securitizations.

Securitization activity

The following table provides information related to the Firm’s securitization activities for the three and nine months ended September 30, 2019 and 2018, 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.

	Three months ended September 30,								Nine months ended September 30,
	2019				2018				2019				2018
(in millions)	Residential mortgage(e)		Commercial and other(f)		Residential mortgage(e)		Commercial and other(f)		Residential mortgage(e)		Commercial and other(f)		Residential mortgage(e)		Commercial and other(f)
Principal securitized	$	3,225	$	1,477	$	1,513	$	3,533	$	7,132	$	4,215	$	5,972	$	8,705
All cash flows during the period(a):
Proceeds received from loan sales as financial instruments(b)(c)	$	3,327	$	1,506	$	1,524	$	3,558	$	7,337	$	4,329	$	5,984	$	8,745
Servicing fees collected(d)	70		—		80		1		220		1		240		1
Cash flows received on interests	115		34		99		99		314		183		328		230

(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 prime mortgages only. Excludes loan securitization activity related to U.S. GSEs and government agencies.

(f) Includes commercial mortgage and other consumer loans.

Loans and excess MSRs sold to U.S. government-sponsored

enterprises, and loans in securitization transactions pursuant to

Ginnie Mae guidelines

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. 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 22 of this Form 10-Q, and Note 27 of JPMorgan Chase’s 2018 Form 10-K for additional information about the Firm’s loan sales- and securitization-related indemnifications. Refer to Note 14 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, and loans in securitization transactions pursuant to Ginnie Mae guidelines.

	Three months ended September 30,				Nine months ended September 30,
(in millions)	2019		2018		2019		2018
Carrying value of loans sold	$	35,556	$	11,968	$	73,873	$	28,804
Proceeds received from loan sales as cash	3		1		73		1
Proceeds from loan sales as securities(a)(b)	35,512		11,713		73,172		28,291
Total proceeds received from loan sales(c)	$	35,515	$	11,714	$	73,245	$	28,292
Gains on loan sales(d)(e)	$	342	$	9	$	495	$	32

(a) Includes securities from U.S. GSEs and Ginnie Mae that are generally sold shortly after receipt or retained as part of the Firm’s Investment securities portfolio.

(b) Included in level 2 assets.

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

(d) Gains on loan sales include the value of MSRs.

(e) 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 22, 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 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. Refer to Note 11 for additional information.

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 September 30, 2019 and December 31, 2018. Substantially all of these loans and real estate are insured or guaranteed by U.S. government agencies.

(in millions)	Sep 30, 2019		Dec 31, 2018
Loans repurchased or option to repurchase(a)	$	4,761	$	7,021
Real estate owned	50		75
Foreclosed government-guaranteed residential mortgage loans(b)	241		361

(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 September 30, 2019, and December 31, 2018.

									Net liquidation losses(a)
	Securitized assets				90 days past due				Three months ended September 30,				Nine months ended September 30,
(in millions)	Sep 30, 2019		Dec 31, 2018		Sep 30, 2019		Dec 31, 2018		2019		2018		2019		2018
Securitized loans
Residential mortgage:
Prime / Alt-A & option ARMs	$	49,826	$	50,679	$	2,679	$	3,354	$	146	$	182	$	474	$	453
Subprime	14,085		15,434		1,962		2,478		145		155		456		(307		)
Commercial and other	86,302		79,387		153		225		118		71		283		119
Total loans securitized	$	150,213	$	145,500	$	4,794	$	6,057	$	409	$	408	$	1,213	$	265

(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.