Securitizations and Variable Interest Entities (Tables)

3 Months Ended

Mar. 31, 2020

Securitizations and Variable Interest Entities [Abstract]

Table 10.1 provides the classifications of assets and liabilities in our balance sheet for our transactions with VIEs.

Table 10.1: 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
March 31, 2020
Cash and due from banks	$	—	19		—	19
Interest-earning deposits with banks	—		—		—	—
Debt securities (1):
Trading debt securities	1,326		316		—	1,642
Available-for-sale debt securities	1,718		300		—	2,018
Held-to-maturity debt securities	1,158		—		—	1,158
Loans	2,196		13,102		77	15,375
Mortgage servicing rights	8,709		—		—	8,709
Derivative assets	269		6		—	275
Equity securities	11,337		95		—	11,432
Other assets	1,030		258		—	1,288
Total assets	27,743		14,096		77	41,916
Short-term borrowings	—		500		—	500
Derivative liabilities	2		8		—	10
Accrued expenses and other liabilities	154		231		—	385
Long-term debt	4,722		235		76	5,033
Total liabilities	4,878		974		76	5,928
Noncontrolling interests	—		33		—	33
Net assets	$	22,865	13,089		1	35,955
December 31, 2019
Cash and due from banks	$	—	16		—	16
Interest-earning deposits with banks	—		284		—	284
Debt securities (1):
Trading debt securities	792		339		—	1,131
Available-for-sale debt securities	1,696		201		—	1,897
Held-to-maturity debt securities	791		—		—	791
Loans	2,127		13,170		80	15,377
Mortgage servicing rights	11,884		—		—	11,884
Derivative assets	142		1		—	143
Equity securities	11,401		118		—	11,519
Other assets	1,268		239		—	1,507
Total assets	30,101		14,368		80	44,549
Short-term borrowings	—		401		—	401
Derivative liabilities	1		3		—	4
Accrued expenses and other liabilities	189		235		—	424
Long-term debt	4,817		587		79	5,483
Total liabilities	5,007		1,226		79	6,312
Noncontrolling interests	—		43		—	43
Net assets	$	25,094	13,099		1	38,194


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

Unconsolidated VIEs

Table 10.2 provides a summary of our exposure to unconsolidated VIEs with which we have significant continuing involvement but for which we are not the primary beneficiary.

We include transactions where we were the sponsor or servicer and also have other significant forms of continuing

involvement. Sponsorship includes transactions where we solely or materially participated in the initial design or structuring of the VIE or marketed the transaction to investors. We consider investments in securities, loans, guarantees, liquidity agreements, commitments and certain derivatives to be other forms of continuing involvement that may be significant. We also include transactions where we transferred assets to a VIE, account for the transfer as a sale, and service the VIE collateral or have other forms of continuing involvement that may be significant (as described above). We exclude certain transactions with unconsolidated VIEs when our continuing involvement is temporary in nature or insignificant in size. We also exclude 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 10.2: Unconsolidated VIEs



			Carrying value – asset (liability)
(in millions)	Total VIE assets		Debt and equity interests (1)		Servicing assets and advances	Derivatives	Debt, guarantees, and other commitments		Net assets
March 31, 2020
Residential mortgage loan securitizations:
Conforming (2)	$	1,082,170	2,103		8,607	—	(649	)	10,061
Other/nonconforming	5,226		120		89	—	—		209
Commercial mortgage loan securitizations	174,761		2,440		1,043	196	(18	)	3,661
Tax credit structures	39,499		12,841		—	—	(4,201	)	8,640
Other asset-based finance structures	1,314		190		—	71	(8	)	253
Other	1,118		41		—	—	—		41
Total	$	1,304,088	17,735		9,739	267	(4,876	)	22,865
			Maximum exposure to loss
			Debt and equity interests (1)		Servicing assets and advances	Derivatives	Debt, guarantees, and other commitments		Total exposure
Residential mortgage loan securitizations:
Conforming (2)			$	1,582	8,607	—	973		11,162
Other/nonconforming			120		89	—	—		209
Commercial mortgage loan securitizations			2,440		1,043	196	11,776		15,455
Tax credit structures			12,841		—	—	1,684		14,525
Other asset-based finance structures			190		—	76	79		345
Other			41		—	—	157		198
Total			$	17,214	9,739	272	14,669		41,894

			Carrying value – asset (liability)
(in millions)	Total VIE assets		Debt and equity interests (1)		Servicing assets and advances	Derivatives	Debt, guarantees, and other commitments		Net assets
December 31, 2019
Residential mortgage loan securitizations:
Conforming (2)	$	1,098,103	1,528		11,931	—	(683	)	12,776
Other/nonconforming	5,178		6		152	—	—		158
Commercial mortgage loan securitizations	169,736		2,239		1,069	80	(43	)	3,345
Tax credit structures	39,091		12,826		—	—	(4,260	)	8,566
Other asset-based finance structures	1,355		157		—	61	(20	)	198
Other	1,167		51		—	—	—		51
Total	$	1,314,630	16,807		13,152	141	(5,006	)	25,094
			Maximum exposure to loss
			Debt and equity interests (1)		Servicing assets and advances	Derivatives	Debt, guarantees, and other commitments		Total exposure
Residential mortgage loan securitizations:
Conforming (2)			$	972	11,931	—	937		13,840
Other/nonconforming			6		152	—	—		158
Commercial mortgage loan securitizations			2,239		1,069	80	11,667		15,055
Tax credit structures			12,826		—	—	1,701		14,527
Other asset-based finance structures			157		—	63	91		311
Other			51		—	—	157		208
Total			$	16,251	13,152	143	14,553		44,099


(1)	Includes total equity interests of $11.3 billion and $11.4 billion at March 31, 2020, and December 31, 2019, respectively. 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)

Carrying values include assets and related liabilities of $521 million and $556 million at March 31, 2020, and December 31, 2019, respectively, related to certain unexercised unconditional repurchase options. These amounts represent the carrying value of the loans and associated debt that would be payable if the option was exercised to repurchase eligible loans from GNMA loan securitizations. These amounts are excluded from maximum exposure to loss as we are not obligated to exercise the options

Transfers with Continuing Involvement

Table 10.3 presents information about transfers during the period of assets to unconsolidated VIEs or third-party investors for which we recorded the transfers as sales and have continuing involvement with the transferred assets. In connection with these transfers, we recorded servicing assets, securities, and a liability for repurchase losses which reflects management’s estimate of probable losses related to various representations and warranties for the loans transferred. Each of these interests are initially measured at fair value. Servicing rights are classified as Level 3 measurements, and securities are initially predominantly classified as Level 2.

Sales with continuing involvement include securitizations of conforming residential mortgages that are sold to the GSEs or GNMA. Substantially all transfers to these entities resulted in no gain or loss because the loans were already measured at fair value on a recurring basis.

Table 10.3: Transfers With Continuing Involvement



	Quarter ended March 31,
(in millions)			2020		2019
	Residential mortgages		Commercial mortgages	Residential mortgages	Commercial mortgages
Net gains (losses) on sale	$	52	69	14	47
Asset balances sold	47,857		2,728	34,103	2,702
Servicing rights recognized	446		34	320	26
Securities recognized	2,313		62	912	—
Liability for repurchase losses recognized	3		—	3	—

Residential Mortgage Servicing Rights

Table 10.4 presents the key weighted-average assumptions we used to measure residential MSRs at the date of securitization.

Table 10.4: Residential Mortgage Servicing Rights



	Residential mortgage servicing rights
	2020			2019
Quarter ended March 31,
Prepayment speed (1)	12.7		%	13.5
Discount rate	6.5			8.1
Cost to service ($ per loan) (2)	$	91		94


(1)	The prepayment speed assumption for residential MSRs 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 due to changes in model assumptions and the mix of modified government-guaranteed loans sold to GNMA.

Cash Inflows (Outflows) from Sales and Securitization Activity

Table 10.5 presents the proceeds related to transfers accounted for as sales in which we have continuing involvement with the transferred financial assets, as well as current period cash flows from continuing involvement with previous transfers accounted for as sales. Cash flows from other interests held predominantly include principal and interest payments received on retained bonds. Repurchases of assets represents cash paid to repurchase loans from investors under representation and warranty obligations or in connection with the exercise of cleanup calls on securitizations. Loss reimbursements is cash paid to reimburse investors for losses on individual loans that are already liquidated. Government insured loans are delinquent loans that we service and have exercised our option to purchase out of GNMA pools. These loans are insured by the FHA or guaranteed by the VA.

Table 10.5: Cash Inflows (Outflows) From Sales and Securitization Activity



	Mortgage loans
(in millions)	2020			2019
Quarter ended March 31,
Proceeds from securitizations and whole loan sales	$	50,229		36,507
Fees from servicing rights retained	756			780
Cash flows from other interests held	167			111
Repurchases of assets/loss reimbursements:
Non-agency securitizations and whole loan transactions	—			—
Government insured loans	(1,440		)	(1,942	)
Agency securitizations	(26		)	(17	)
Servicing advances, net of recoveries (1)	33			39


(1)	Cash flows from servicing advances includes principal and interest payments to investors required by servicing agreements.

Retained Interests from Unconsolidated VIEs

Table 10.6 provides key economic assumptions and the sensitivity of the current fair value of residential MSRs and other interests held related to unconsolidated VIEs to immediate adverse changes in those assumptions. Amounts for residential MSRs include purchased servicing rights as well as servicing rights resulting from the transfer of loans. See Note 16 (Fair Values of Assets and Liabilities) for additional information on key economic assumptions for residential MSRs. “Other interests held” were obtained when we securitized residential and commercial mortgage loans. Residential mortgage-backed securities retained

in securitizations issued through GSEs or GNMA, are excluded from the table because these securities have a remote risk of credit loss due to the GSE or government guarantee. These securities also have economic characteristics similar to GSE or GNMA 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 10.6: Retained Interests from Unconsolidated VIEs



				Other interests held
	Residential mortgage servicing rights				Commercial
($ in millions, except cost to service amounts)					Subordinated bonds			Senior bonds
Fair value of interests held at March 31, 2020	$	8,126			924			326
Expected weighted-average life (in years)	4.3				7.1			5.6
Key economic assumptions:
Prepayment speed assumption	15.7		%
Decrease in fair value from:
10% adverse change	$	475
25% adverse change	1,105
Discount rate assumption	7.1		%		5.4			3.5
Decrease in fair value from:
100 basis point increase	$	293			54			16
200 basis point increase	563				103			30
Cost to service assumption ($ per loan)	112
Decrease in fair value from:
10% adverse change	234
25% adverse change	585
Credit loss assumption					3.7		%	—
Decrease in fair value from:
10% higher losses					$	28		—
25% higher losses					31			—
Fair value of interests held at December 31, 2019	$	11,517			909			352
Expected weighted-average life (in years)	5.3				7.3			5.5
Key economic assumptions:
Prepayment speed assumption	11.9		%
Decrease in fair value from:
10% adverse change	$	537
25% adverse change	1,261
Discount rate assumption	7.2		%		4.0			2.9
Decrease in fair value from:
100 basis point increase	$	464			53			16
200 basis point increase	889				103			32
Cost to service assumption ($ per loan)	102
Decrease in fair value from:
10% adverse change	253
25% adverse change	632
Credit loss assumption					3.1		%	—
Decrease in fair value from:
10% higher losses					$	1		—
25% higher losses					4			—

Off-Balance Sheet Loans Sold or Securitized

Table 10.7 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 10.7: Off-Balance Sheet Loans Sold or Securitized



						Net charge-offs (2)
	Total loans			Delinquent loans and foreclosed assets (1)		Quarter ended Mar 31,
(in millions)	Mar 31, 2020		Dec 31, 2019	Mar 31, 2020	Dec 31, 2019	2020	2019
Commercial:
Real estate mortgage	$	113,196	112,507	679	776	71	79
Total commercial	113,196		112,507	679	776	71	79
Consumer:
Real estate 1-4 family first mortgage	986,570		1,008,446	6,326	6,664	31	67
Real estate 1-4 family junior lien mortgage	12		13	2	2	—	—
Total consumer	986,582		1,008,459	6,328	6,666	31	67
Total off-balance sheet sold or securitized loans (3)	$	1,099,778	1,120,966	7,007	7,442	102	146


(1)	Includes $365 million and $492 million of commercial foreclosed assets and $354 million and $356 million of consumer foreclosed assets at March 31, 2020, and December 31, 2019, respectively.


(2)	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.

(3)

At March 31, 2020, and December 31, 2019, the table includes total loans of $1.0 trillion at both dates, delinquent loans of $5.2 billion at both dates, and foreclosed assets of $259 million and $251 million, respectively, for FNMA, FHLMC and GNMA.

Transactions with Consolidated VIEs and Secured Borrowings

Table 10.8 presents a summary of financial assets and liabilities for asset transfers accounted for as secured borrowings and involvements with consolidated VIEs. Carrying values of “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 10.8: Transactions with Consolidated VIEs and Secured Borrowings



			Carrying value
(in millions)	Total VIE assets		Assets	Liabilities		Noncontrolling interests		Net assets
March 31, 2020
Secured borrowings:
Residential mortgage securitizations	$	77	77	(76	)	—		1
Total secured borrowings	77		77	(76	)	—		1
Consolidated VIEs:
Commercial and industrial loans and leases	7,760		7,755	(226	)	(11	)	7,518
Nonconforming residential mortgage loan securitizations	679		567	(236	)	—		331
Commercial real estate loans	5,022		5,022	—		—		5,022
Municipal tender option bond securitizations	500		505	(502	)	—		3
Other	247		247	(10	)	(22	)	215
Total consolidated VIEs	14,208		14,096	(974	)	(33	)	13,089
Total secured borrowings and consolidated VIEs	$	14,285	14,173	(1,050	)	(33	)	13,090
December 31, 2019
Secured borrowings:
Residential mortgage securitizations	$	81	80	(79	)	—		1
Total secured borrowings	81		80	(79	)	—		1
Consolidated VIEs:
Commercial and industrial loans and leases	8,054		8,042	(529	)	(16	)	7,497
Nonconforming residential mortgage loan securitizations	935		809	(290	)	—		519
Commercial real estate loans	4,836		4,836	—		—		4,836
Municipal tender option bond securitizations	401		402	(401	)	—		1
Other	279		279	(6	)	(27	)	246
Total consolidated VIEs	14,505		14,368	(1,226	)	(43	)	13,099
Total secured borrowings and consolidated VIEs	$	14,586	14,448	(1,305	)	(43	)	13,100