Securitizations and Variable Interest Entities

We are involved in several types of securitization and financing transactions that utilize special-purpose entities (SPEs). A SPE is a legal entity that is designed to fulfill a specified limited need of the sponsor. Our principal use of SPEs is to obtain liquidity by securitizing certain of our financial assets and operating lease assets.

The transaction-specific SPEs involved in our securitization and other financing transactions are often considered VIEs. VIEs are entities that have either a total equity investment at risk that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors at risk lack the ability to control the entity's activities.

We provide a wide range of consumer and commercial automotive loans, operating leases, and commercial loans to a diverse customer base. We securitize consumer and commercial automotive loans, and operating leases through private-label securitizations. We often securitize these loans and notes secured by operating leases (collectively referred to as financial assets) through the use of securitization entities, which may or may not be consolidated on our Condensed Consolidated Balance Sheet.

The pretax gain on sales of financial assets into nonconsolidated consumer automotive securitization trusts was $0 million and $2 million for the three months and six months ended June 30, 2017, respectively. There were no pretax gains or losses for the three months and six months ended June 30, 2016.

We provide long-term guarantee contracts to investors in certain nonconsolidated affordable housing entities and have extended a line of credit to provide liquidity. Since we do not have control over the entities or the power to make decisions, we do not consolidate the entities and our involvement is limited to the guarantee and the line of credit.

We have involvement with various other nonconsolidated equity investments, including affordable housing entities and venture capital funds and loan funds. We do not consolidate these entities and our involvement is limited to our outstanding investment, additional capital committed to these funds plus any previously recognized low income housing tax credits that are subject to recapture.

Refer to Note 11 to the Consolidated Financial Statements included in our 2016 Annual Report on Form 10-K for further description of our securitization activities and our involvement with VIEs.

The following table presents our involvement in consolidated and nonconsolidated VIEs in which we hold variable interests. For additional detail related to the assets and liabilities of consolidated variable interest entities refer to the Condensed Consolidated Balance Sheet.



($ in millions)	Carrying value of total assets			Carrying value of total liabilities			Assets sold to nonconsolidated VIEs (a)		Maximum exposure to loss in nonconsolidated VIEs
June 30, 2017
On-balance sheet variable interest entities
Consumer automotive	$	18,495	(b)	$	7,941	(c)
Commercial automotive	14,052			4,657
Off-balance sheet variable interest entities
Consumer automotive	48		(d)	—			$	2,662	$	2,710	(e)
Commercial other	539		(f)	229		(g)	—		719		(h)
Total	$	33,134		$	12,827		$	2,662	$	3,429
December 31, 2016
On-balance sheet variable interest entities
Consumer automotive	$	20,869	(b)	$	8,557	(c)
Commercial automotive	16,278			4,764
Off-balance sheet variable interest entities
Consumer automotive	24		(d)	—			$	2,899	$	2,923	(e)
Commercial other	460		(f)	169		(g)	—		651		(h)
Total	$	37,631		$	13,490		$	2,899	$	3,574


(a)	Asset values represent the current unpaid principal balance of outstanding consumer finance receivables and loans within the VIEs.


(b)	Includes $9.0 billion and $9.6 billion of assets that are not encumbered by VIE beneficial interests held by third parties at June 30, 2017, and December 31, 2016, respectively. Ally or consolidated affiliates hold the interests in these assets, which eliminate in consolidation.


(c)	Includes $87 million and $50 million of liabilities due to consolidated affiliates at June 30, 2017, and December 31, 2016, respectively. These liabilities are not obligations to third-party beneficial interest holders. These liabilities are secured by a portion of the unencumbered assets and eliminate in consolidation.

(d)

Includes $46 million classified as held-to-maturity securities and $2 million classified as other assets at June 30, 2017. Of the total amount at June 30, 2017, $48 million represents retained notes and certificated residual interests. These assets represent our compliance with the risk retention rules under the Dodd-Frank Act, requiring us to retain at least five percent of the credit risk of the assets underlying asset-backed securitizations, which became effective on December 24, 2016. Amounts at December 31, 2016, are classified as other assets.

(e)

Maximum exposure to loss represents the current unpaid principal balance of outstanding loans, retained notes, certificated residual interests, as well as certain noncertificated interests retained from the sale of automotive finance receivables. This measure is based on the very unlikely event that all of our sold loans have defects that would trigger a representation and warranty provision and the underlying collateral supporting the loans becomes worthless. This required disclosure is not an indication of our expected loss.


(f)	Amounts are classified as other assets.


(g)	Amounts are classified as accrued expenses and other liabilities.

(h)

For certain nonconsolidated affordable housing entities, maximum exposure to loss represents the yield we guaranteed investors through long-term guarantee contracts. The amount disclosed is based on the unlikely event that the underlying properties cease generating yield to investors and the yield delivered to investors in the form of low income tax housing credits is recaptured. For nonconsolidated equity investments, maximum exposure to loss represents our outstanding investment, additional committed capital, and low income housing tax credits subject to recapture. The amount disclosed is based on the unlikely event that our committed capital is funded, our investments become worthless, and the tax credits previously delivered to us are recaptured. This required disclosure is not an indication of our expected loss.

Cash Flows with Off-balance Sheet Securitization Entities

The following table summarizes cash flows received and paid related to securitization entities and asset-backed financings where the transfer is accounted for as a sale and we have a continuing involvement with the transferred assets (e.g., servicing) that were outstanding during the six months ended June 30, 2017, and 2016. Additionally, this table contains information regarding cash flows received from and paid to nonconsolidated securitization entities that existed during each period.



Six months ended June 30, ($ in millions)	Consumer automotive
2017
Cash proceeds from transfers completed during the period	$	1,187
Cash disbursements for repurchases during the period (a)	(491		)
Servicing fees	18
Cash flows received on retained interests in securitization entities	10
Other cash flows	4
2016
Cash proceeds from transfers completed during the period	$	1,604
Servicing fees	17
Other cash flows	5


(a)	During the second quarter of 2017, we elected to not renew a retail automotive credit conduit facility and also purchased the related retail automotive loans and settled associated retained interests.

Delinquencies and Net Credit Losses

The following tables represent on-balance sheet loans held-for-sale and finance receivables and loans, off-balance sheet securitizations, and whole-loan sales where we have continuing involvement. The tables present quantitative information about delinquencies and net credit losses.



	Total Amount				Amount 60 days or more past due
($ in millions)	June 30, 2017		December 31, 2016		June 30, 2017		December 31, 2016
On-balance sheet loans
Consumer automotive	$	66,774	$	65,793	$	586	$	730
Consumer mortgage	11,297		11,050		82		85
Commercial automotive	38,840		38,853		8		7
Commercial other	3,634		3,248		—		—
Total on-balance sheet loans	120,545		118,944		676		822
Off-balance sheet securitization entities
Consumer automotive	2,662		2,392		13		13
Total off-balance sheet securitization entities	2,662		2,392		13		13
Whole-loan sales (a)	1,947		3,164		3		6
Total	$	125,154	$	124,500	$	692	$	841


(a)	Whole-loan sales are not part of a securitization transaction, but represent consumer automotive pools of loans sold to third-party investors.



	Net credit losses
	Three months ended June 30,				Six months ended June 30,
($ in millions)	2017		2016		2017		2016
On-balance sheet loans
Consumer automotive	$	199	$	148	$	450	$	321
Consumer mortgage	—		4		2		10
Total on-balance sheet loans	199		152		452		331
Off-balance sheet securitization entities
Consumer automotive	3		2		6		4
Total off-balance sheet securitization entities	3		2		6		4
Whole-loan sales (a)	1		1		2		1
Total	$	203	$	155	$	460	$	336


(a)	Whole-loan sales are not part of a securitization transaction, but represent consumer automotive pools of loans sold to third-party investors.