Securitizations and Variable Interest Entities (Tables)

6 Months Ended

Jun. 30, 2017

Securitizations and Variable Interest Entities [Abstract]

Table 7.1 provides the classifications of assets and liabilities in our balance sheet for our transactions with VIEs.

Table 7.1: Balance Sheet Transactions with VIEs



(in millions)	VIEs that we do not consolidate		VIEs that we consolidate	Transfers that we account for as secured borrowings		Total
June 30, 2017
Cash	$	—	112		—	112
Federal funds sold, securities purchased under resale agreements and other short-term investments	—		424		—	424
Trading assets	1,431		50		201	1,682
Investment securities (1)	5,145		—		381	5,526
Loans	5,456		12,096		121	17,673
Mortgage servicing rights	13,337		—		—	13,337
Derivative assets	77		—		—	77
Other assets	10,321		339		6	10,666
Total assets	35,767		13,021		709	49,497
Short-term borrowings	—		—		539	539
Derivative liabilities	92		28	(2)	—	120
Accrued expenses and other liabilities	235		96	(2)	1	332
Long-term debt	3,282		2,835	(2)	122	6,239
Total liabilities	3,609		2,959		662	7,230
Noncontrolling interests	—		86		—	86
Net assets	$	32,158	9,976		47	42,181
December 31, 2016
Cash	$	—	168		—	168
Federal funds sold, securities purchased under resale agreements and other short-term investments	—		74		—	74
Trading assets	2,034		130		201	2,365
Investment securities (1)	8,530		—		786	9,316
Loans	6,698		12,589		138	19,425
Mortgage servicing rights	13,386		—		—	13,386
Derivative assets	91		1		—	92
Other assets	10,281		452		11	10,744
Total assets	41,020		13,414		1,136	55,570
Short-term borrowings	—		—		905	905
Derivative liabilities	59		33	(2)	—	92
Accrued expenses and other liabilities	306		107	(2)	2	415
Long-term debt	3,598		3,694	(2)	136	7,428
Total liabilities	3,963		3,834		1,043	8,840
Noncontrolling interests	—		138		—	138
Net assets	$	37,057	9,442		93	46,592


(1)	Excludes certain debt securities related to loans serviced for the Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) and GNMA.


(2)	There were no VIE liabilities with recourse to the general credit of Wells Fargo for the periods presented.

Unconsolidated VIEs

Table 7.2 provides a summary of unconsolidated VIEs with which we have significant continuing involvement, but we are not the primary beneficiary. We do not consider our continuing involvement in an unconsolidated VIE to be significant when it relates to third-party sponsored VIEs for which we were not the transferor (unless we are servicer and have other significant forms of involvement) or if we were the sponsor only or sponsor and servicer but do not have any other forms of significant involvement.

Significant continuing involvement includes transactions where we were the sponsor or transferor and have other significant forms of involvement. Sponsorship includes transactions with unconsolidated VIEs where we solely or materially participated in the initial design or structuring of the entity or marketing of the transaction to investors. When we transfer assets to a VIE and account for the transfer as a sale, we are considered the transferor. We consider investments in securities (other than those held temporarily in trading), loans, guarantees, liquidity agreements, written options and servicing of collateral to be other forms of involvement that may be significant. We have excluded certain transactions with unconsolidated VIEs from the balances presented in the following table where we have determined that our continuing involvement is not significant due to the temporary nature and size of our variable interests, because we were not the transferor or because we were not involved in the design of the unconsolidated VIEs. We also exclude from the table secured borrowing transactions with unconsolidated VIEs (for information on these transactions, see the Transactions with Consolidated VIEs and Secured Borrowings section in this Note).

Table 7.2: Unconsolidated VIEs



			Carrying value – asset (liability)
(in millions)	Total VIE assets		Debt and equity interests (1)		Servicing assets	Derivatives		Other commitments and guarantees		Net assets
June 30, 2017
Residential mortgage loan securitizations:
Conforming (2)	$	1,171,325	2,299		12,394	—		(180	)	14,513
Other/nonconforming	16,198		801		90	—		(2	)	889
Commercial mortgage securitizations	144,257		2,556		853	75		(33	)	3,451
Collateralized debt obligations:
Debt securities	1,157		—		—	—		(20	)	(20	)
Loans (3)	1,511		1,473		—	—		—		1,473
Asset-based finance structures	4,862		3,755		—	—		—		3,755
Tax credit structures	29,774		10,811		—	—		(3,282	)	7,529
Collateralized loan obligations	29		8		—	—		—		8
Investment funds	214		54		—	—		—		54
Other (4)	2,611		596		—	(90	)	—		506
Total	$	1,371,938	22,353		13,337	(15	)	(3,517	)	32,158
			Maximum exposure to loss
			Debt and equity interests (1)		Servicing assets	Derivatives		Other commitments and guarantees		Total exposure
Residential mortgage loan securitizations:
Conforming			$	2,299	12,394	—		875		15,568
Other/nonconforming			801		90	—		2		893
Commercial mortgage securitizations			2,556		853	79		9,767		13,255
Collateralized debt obligations:
Debt securities			—		—	—		20		20
Loans (3)			1,473		—	—		—		1,473
Asset-based finance structures			3,755		—	—		71		3,826
Tax credit structures			10,811		—	—		1,024		11,835
Collateralized loan obligations			8		—	—		—		8
Investment funds			54		—	—		—		54
Other (4)			596		—	107		158		861
Total			$	22,353	13,337	186		11,917		47,793

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			Carrying value – asset (liability)
(in millions)	Total VIE assets		Debt and equity interests (1)		Servicing assets	Derivatives		Other commitments and guarantees		Net assets
December 31, 2016
Residential mortgage loan securitizations:
Conforming (2)	$	1,166,296	3,026		12,434	—		(232	)	15,228
Other/nonconforming	18,805		873		109	—		(2	)	980
Commercial mortgage securitizations	166,596		4,258		843	87		(35	)	5,153
Collateralized debt obligations:
Debt securities	1,472		—		—	—		(25	)	(25	)
Loans (3)	1,545		1,507		—	—		—		1,507
Asset-based finance structures	9,152		6,522		—	—		—		6,522
Tax credit structures	29,713		10,669		—	—		(3,609	)	7,060
Collateralized loan obligations	78		10		—	—		—		10
Investment funds	214		48		—	—		—		48
Other (4)	1,733		630		—	(56	)	—		574
Total	$	1,395,604	27,543		13,386	31		(3,903	)	37,057
			Maximum exposure to loss
			Debt and equity interests (1)		Servicing assets	Derivatives		Other commitments and guarantees		Total exposure
Residential mortgage loan securitizations:
Conforming			$	3,026	12,434	—		979		16,439
Other/nonconforming			873		109	—		2		984
Commercial mortgage securitizations			4,258		843	94		9,566		14,761
Collateralized debt obligations:
Debt securities			—		—	—		25		25
Loans (3)			1,507		—	—		—		1,507
Asset-based finance structures			6,522		—	—		72		6,594
Tax credit structures			10,669		—	—		1,104		11,773
Collateralized loan obligations			10		—	—		—		10
Investment funds			48		—	—		—		48
Other (4)			630		—	93		—		723
Total			$	27,543	13,386	187		11,748		52,864


(1)	Includes total equity interests of $10.3 billion at both June 30, 2017, and December 31, 2016. Also includes debt interests in the form of both loans and securities. Excludes certain debt securities held related to loans serviced for FNMA, FHLMC and GNMA.

(2)

Excludes assets and related liabilities with a recorded carrying value on our balance sheet of $1.1 billion and $1.2 billion at June 30, 2017, and December 31, 2016, respectively, for certain delinquent loans that are eligible for repurchase from GNMA loan securitizations. The recorded carrying value represents the amount that would be payable if the Company was to exercise the repurchase option. The carrying amounts are excluded from the table because the loans eligible for repurchase do not represent interests in the VIEs.

(3)

Represents senior loans to trusts that are collateralized by asset-backed securities. The trusts invest in senior tranches from a diversified pool of U.S. asset securitizations, of which all are current and 100% were rated as investment grade by the primary rating agencies at both June 30, 2017, and December 31, 2016. These senior loans are accounted for at amortized cost and are subject to the Company’s allowance and credit charge-off policies.


(4)	Includes structured financing and credit-linked note structures. Also contains investments in auction rate securities (ARS) issued by VIEs that we do not sponsor and, accordingly, are unable to obtain the total assets of the entity.

Cash Flows from Sales and Securitization Activity

Table 7.3 presents the cash flows for our transfers accounted for as sales.

Table 7.3: Cash Flows From Sales and Securitization Activity



	2017				2016
(in millions)	Mortgage loans			Other financial assets	Mortgage loans		Other financial assets
Quarter ended June 30,
Proceeds from securitizations and whole loan sales	$	52,824		4	66,455		83
Fees from servicing rights retained	840			—	864		—
Cash flows from other interests held (1)	641			—	627		—
Repurchases of assets/loss reimbursements (2):
Non-agency securitizations and whole loan transactions	5			—	15		—
Agency securitizations (3)	23			—	35		—
Servicing advances, net of repayments	(20		)	—	(39	)	—
Six months ended June 30,
Proceeds from securitizations and whole loan sales	$	111,081		25	111,471		133
Fees from servicing rights retained	1,694			—	1,745		—
Cash flows from other interests held (1)	1,475			—	1,034		1
Repurchases of assets/loss reimbursements (2):
Non-agency securitizations and whole loan transactions	7			—	18		—
Agency securitizations (3)	46			—	82		—
Servicing advances, net of repayments	(162		)	—	(107	)	—


(1)	Cash flows from other interests held include principal and interest payments received on retained bonds and excess cash flows received on interest-only strips.


(2)	Consists of cash paid to repurchase loans from investors and cash paid to investors to reimburse them for losses on individual loans that are already liquidated.

(3)

Represent loans repurchased from GNMA, FNMA, and FHLMC under representation and warranty provisions included in our loan sales contracts. Second quarter and first half of 2017 exclude $1.6 billion and $3.9 billion, respectively in delinquent insured/guaranteed loans that we service and have exercised our option to purchase out of GNMA pools, compared with $2.0 billion and $4.9 billion, respectively, in the same periods of 2016. These loans are predominantly insured by the FHA or guaranteed by the VA.

Residential Mortgage Servicing Rights

Table 7.4 presents the key weighted-average assumptions we used to measure residential mortgage servicing rights at the date of securitization.

Table 7.4: Residential Mortgage Servicing Rights



	Residential mortgage servicing rights
	2017			2016
Quarter ended June 30,
Prepayment speed (1)	12.8		%	12.1
Discount rate	6.9			6.7
Cost to service ($ per loan) (2)	$	152		141
Six months ended June 30,
Prepayment speed (1)	11.5		%	12.5
Discount rate	6.8			6.8
Cost to service ($ per loan) (2)	$	142		143


(1)	The prepayment speed assumption for residential mortgage servicing rights includes a blend of prepayment speeds and default rates. Prepayment speed assumptions are influenced by mortgage interest rate inputs as well as our estimation of drivers of borrower behavior.


(2)	Includes costs to service and unreimbursed foreclosure costs, which can vary period to period depending on the mix of modified government-guaranteed loans sold to GNMA.

Retained Interests from Unconsolidated VIEs

Table 7.5 provides key economic assumptions and the sensitivity of the current fair value of residential mortgage servicing rights and other interests held to immediate adverse changes in those assumptions. “Other interests held” relate to residential and commercial mortgage loan securitizations. Residential mortgage-backed securities retained in securitizations issued through GSEs, such as FNMA, FHLMC and GNMA, are excluded from the table because these securities have a remote risk of credit loss due to the GSE guarantee. These securities also have economic characteristics similar to GSE mortgage-backed securities that we purchase, which are not included in the table. Subordinated interests include only those bonds whose credit rating was below AAA by a major rating agency at issuance. Senior interests include only those bonds whose credit rating was AAA by a major rating agency at issuance. The information presented excludes trading positions held in inventory.

Table 7.5: Retained Interests from Unconsolidated VIEs



				Other interests held
	Residential mortgage servicing rights (1)			Interest-only strips	Consumer			Commercial (2)
($ in millions, except cost to service amounts)	Residential mortgage servicing rights (1)			Interest-only strips	Subordinated bonds			Subordinated bonds	Senior bonds
Fair value of interests held at June 30, 2017	$	12,789		24	—			487	538
Expected weighted-average life (in years)	6.2			3.8	0.0			5.5	5.3
Key economic assumptions:
Prepayment speed assumption (3)	10.5		%	17.3	—
Decrease in fair value from:
10% adverse change	$	560		1	—
25% adverse change	1,326			2	—
Discount rate assumption	6.8		%	13.4	—			4.0	2.8
Decrease in fair value from:
100 basis point increase	$	632		—	—			21	24
200 basis point increase	1,206			1	—			40	46
Cost to service assumption ($ per loan)	149
Decrease in fair value from:
10% adverse change	484
25% adverse change	1,210
Credit loss assumption					—		%	2.4	—
Decrease in fair value from:
10% higher losses					$	—		—	—
25% higher losses					—			—	—
Fair value of interests held at December 31, 2016	$	12,959		28	1			249	552
Expected weighted-average life (in years)	6.3			3.9	8.3			3.1	5.1
Key economic assumptions:
Prepayment speed assumption (3)	10.3		%	17.4	13.5
Decrease in fair value from:
10% adverse change	$	583		1	—
25% adverse change	1,385			2	—
Discount rate assumption	6.8		%	13.3	10.7			5.2	2.7
Decrease in fair value from:
100 basis point increase	$	649		1	—			7	23
200 basis point increase	1,239			1	—			12	45
Cost to service assumption ($ per loan)	155
Decrease in fair value from:
10% adverse change	515
25% adverse change	1,282
Credit loss assumption					3.0		%	4.7	—
Decrease in fair value from:
10% higher losses					$	—		—	—
25% higher losses					—			—	—


(1)	See narrative following this table for a discussion of commercial mortgage servicing rights.


(2)	Prepayment speed assumptions do not significantly impact the value of commercial mortgage securitization bonds as the underlying commercial mortgage loans experience significantly lower prepayments due to certain contractual restrictions, impacting the borrower’s ability to prepay the mortgage.


(3)	The prepayment speed assumption for residential mortgage servicing rights includes a blend of prepayment speeds and default rates. Prepayment speed assumptions are influenced by mortgage interest rate inputs as well as our estimation of drivers of borrower behavior.

Off-Balance Sheet Loans Sold Or Securitized

Table 7.6 presents information about the principal balances of off-balance sheet loans that were sold or securitized, including residential mortgage loans sold to FNMA, FHLMC, GNMA and other investors, for which we have some form of continuing involvement (including servicer). Delinquent loans include loans 90 days or more past due and loans in bankruptcy, regardless of delinquency status. For loans sold or securitized where servicing is our only form of continuing involvement, we would only experience a loss if we were required to repurchase a delinquent loan or foreclosed asset due to a breach in representations and warranties associated with our loan sale or servicing contracts.

Table 7.6: Off-Balance Sheet Loans Sold or Securitized



						Net charge-offs
	Total loans			Delinquent loans and foreclosed assets (1)		Six months ended June 30,
(in millions)	Jun 30, 2017		Dec 31, 2016	Jun 30, 2017	Dec 31, 2016	2017	2016
Commercial:
Real estate mortgage	$	98,330	106,745	3,507	3,325	382	156
Total commercial	98,330		106,745	3,507	3,325	382	156
Consumer:
Real estate 1-4 family first mortgage	1,149,427		1,160,191	14,287	16,453	395	534
Total consumer	1,149,427		1,160,191	14,287	16,453	395	534
Total off-balance sheet sold or securitized loans (2)	$	1,247,757	1,266,936	17,794	19,778	777	690


(1)	Includes $1.6 billion and $1.7 billion of commercial foreclosed assets and $1.4 billion and $1.8 billion of consumer foreclosed assets at June 30, 2017, and December 31, 2016, respectively.

(2)

At June 30, 2017, and December 31, 2016, the table includes total loans of $1.2 trillion at both dates, delinquent loans of $9.1 billion and $9.8 billion, and foreclosed assets of $978 million and $1.3 billion, respectively, for FNMA, FHLMC and GNMA. Net charge-offs exclude loans sold to FNMA, FHLMC and GNMA as we do not service or manage the underlying real estate upon foreclosure and, as such, do not have access to net charge-off information.

Transactions With Consolidated VIEs And Secured Borrowings

Table 7.7 presents a summary of financial assets and liabilities for asset transfers accounted for as secured borrowings and involvements with consolidated VIEs. “Assets” are presented using GAAP measurement methods, which may include fair value, credit impairment or other adjustments, and therefore in some instances will differ from “Total VIE assets.” For VIEs that obtain exposure synthetically through derivative instruments, the remaining notional amount of the derivative is included in “Total VIE assets.” On the consolidated balance sheet, we separately disclose the consolidated assets of certain VIEs that can only be used to settle the liabilities of those VIEs.

Table 7.7: Transactions with Consolidated VIEs and Secured Borrowings



			Carrying value
(in millions)	Total VIE assets		Assets	Liabilities		Noncontrolling interests		Net assets
June 30, 2017
Secured borrowings:
Municipal tender option bond securitizations	$	677	588	(540	)	—		48
Residential mortgage securitizations	124		121	(122	)	—		(1	)
Total secured borrowings	801		709	(662	)	—		47
Consolidated VIEs:
Commercial and industrial loans and leases	8,698		8,279	(2,055	)	(13	)	6,211
Nonconforming residential mortgage loan securitizations	3,006		2,637	(895	)	—		1,742
Commercial real estate loans	1,922		1,922	—		—		1,922
Structured asset finance	16		10	(7	)	—		3
Investment funds	52		52	(1	)	(32	)	19
Other	140		121	(1	)	(41	)	79
Total consolidated VIEs	13,834		13,021	(2,959	)	(86	)	9,976
Total secured borrowings and consolidated VIEs	$	14,635	13,730	(3,621	)	(86	)	10,023
December 31, 2016
Secured borrowings:
Municipal tender option bond securitizations	$	1,473	998	(907	)	—		91
Residential mortgage securitizations	139		138	(136	)	—		2
Total secured borrowings	1,612		1,136	(1,043	)	—		93
Consolidated VIEs:
Commercial and industrial loans and leases	8,821		8,623	(2,819	)	(14	)	5,790
Nonconforming residential mortgage loan securitizations	3,349		2,974	(1,003	)	—		1,971
Commercial real estate loans	1,516		1,516	—		—		1,516
Structured asset finance	23		13	(9	)	—		4
Investment funds	142		142	(2	)	(67	)	73
Other	166		146	(1	)	(57	)	88
Total consolidated VIEs	14,017		13,414	(3,834	)	(138	)	9,442
Total secured borrowings and consolidated VIEs	$	15,629	14,550	(4,877	)	(138	)	9,535