Involvement with Variable Interest Entities (VIEs)

In the normal course of business, we enter into various types of on- and off-balance sheet transactions with special purpose entities (SPEs), which are corporations, trusts, limited liability companies or partnerships that are established for a limited purpose. SPEs are often formed in connection with securitization transactions whereby financial assets are transferred to an SPE. SPEs formed in connection with securitization transactions are generally considered variable interest entities (VIEs). The VIE may alter the risk profile of the asset by entering into derivative transactions or obtaining credit support, and issues various forms of interests in those assets to investors. When we transfer financial assets from our consolidated balance sheet to a VIE in connection with a securitization, we typically receive cash and sometimes other interests in the VIE as proceeds for the assets we transfer. In certain transactions with VIEs, we may retain the right to service the transferred assets and repurchase the transferred assets if the outstanding balance of the assets falls below the level at which the cost to service the assets exceed the benefits. In addition, we may purchase the right to service loans transferred to a VIE by a third party.

In connection with our securitization or other VIE activities, we have various forms of ongoing involvement with VIEs, which may include:

•underwriting securities issued by VIEs and subsequently making markets in those securities;

•providing credit enhancement on securities issued by VIEs through the use of letters of credit or financial guarantees;

•entering into other derivative contracts with VIEs;

•holding senior or subordinated interests in VIEs;

•acting as servicer or investment manager for VIEs;

•providing administrative or trustee services to VIEs; and

•providing seller financing to VIEs.

Loan Sales and Securitization Activity

We periodically transfer consumer and commercial loans and other types of financial assets in securitization and whole loan sale transactions.

MORTGAGE LOANS SOLD TO U.S. GOVERNMENT SPONSORED ENTITIES AND TRANSACTIONS WITH GINNIE MAE In the normal course of business we sell originated and purchased residential and commercial mortgage loans to government-sponsored entities (GSEs). These loans are generally transferred into securitizations sponsored by the GSEs, which provide certain credit guarantees to investors and servicers. We also transfer mortgage loans into securitization pools pursuant to Government National Mortgage Association (GNMA) guidelines which are insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). Mortgage loans eligible for securitization with the GSEs or GNMA are considered conforming loans. The GSEs or GNMA design the structure of these securitizations, sponsor the involved VIEs, and have power over the activities most significant to the VIE.

We account for loans transferred in conforming mortgage loan securitization transactions as sales and do not consolidate the VIEs as we are not the primary beneficiary. In exchange for the transfer of loans, we typically receive securities issued by the VIEs which we sell to third parties for cash or hold for investment purposes as HTM or AFS securities. We also retain servicing rights on the transferred loans. As a servicer, we retain the option

to repurchase loans from GNMA loan securitization pools, which becomes exercisable when three scheduled loan payments remain unpaid by the borrower. We repurchased loans of $574 million and $2.1 billion, during the third quarter and first nine months of 2022, respectively, and $780 million and $3.7 billion during the third quarter and first nine months of 2021, respectively, which predominantly represented repurchases of government insured loans. We recorded assets and related liabilities of $345 million and $107 million at September 30, 2022, and December 31, 2021, respectively, where we did not exercise our option to repurchase eligible loans.

Upon transfers of loans, we also provide indemnification for losses incurred due to material breaches of contractual representations and warranties, as well as other recourse arrangements. At September 30, 2022, and December 31, 2021, our liability for these repurchase and recourse arrangements was $158 million and $173 million, respectively, and the maximum exposure to loss was $13.6 billion and $13.3 billion at September 30, 2022, and December 31, 2021, respectively.

Loans serviced for others presented in Table 8.3 are predominantly loans in GSE and GNMA securitizations. See Note 9 (Mortgage Banking Activities) for additional information about residential and commercial servicing rights, advances and servicing fees. Substantially all residential servicing activity is related to assets transferred to GSE and GNMA securitizations.

NONCONFORMING MORTGAGE LOAN SECURITIZATIONS In the normal course of business, we sell nonconforming residential and commercial mortgage loans in securitization transactions that we design and sponsor. Nonconforming mortgage loan securitizations do not involve a government credit guarantee, and accordingly, beneficial interest holders are subject to credit risk of the underlying assets held by the securitization VIE. We typically originate the transferred loans, account for the transfers as sales and do not consolidate the VIE. We also typically retain the right to service the loans and may hold other beneficial interests issued by the VIEs, such as debt securities held for investment purposes. Our servicing role related to nonconforming commercial mortgage loan securitizations is limited to primary or master servicer and the most significant decisions impacting the performance of the VIE are generally made by the special servicer or the controlling class security holder. For our residential nonconforming mortgage loan securitizations accounted for as sales, we either do not hold variable interests that we consider potentially significant or are not the primary servicer for a majority of the VIE assets.

WHOLE LOAN SALE TRANSACTIONS We also sell whole loans to VIEs where we have continuing involvement in the form of financing. We account for these transfers as sales, and do not consolidate the VIEs as we do not have the power to direct the most significant activities of the VIEs.

Table 8.1 presents information about transfers of assets during the periods presented for which we recorded the transfers as sales and have continuing involvement with the transferred assets. In connection with these transfers, we received proceeds and recorded servicing assets, securities, and loans. Each of these interests are initially measured at fair value. Servicing rights are classified as Level 3 measurements, and generally securities are classified as Level 2. Substantially all transfers were related to residential mortgage securitizations with the GSEs or GNMA and

resulted in no gain or loss because the loans are measured at fair value on a recurring basis. Additionally, we may transfer certain government insured loans that we previously repurchased. These

loans are carried at the lower of cost or market, and we recognize gains on such transfers when the market value is greater than the carrying value of the loan when it is sold.

Table 8.1: Transfers with Continuing Involvement



	2022			2021
(in millions)	Residential mortgages		Commercial mortgages	Residential mortgages	Commercial mortgages
Quarter ended September 30,
Assets sold	$	14,447	3,061	37,230	3,502
Proceeds from transfer (1)	14,447		3,121	37,412	3,583
Net gains (losses) on sale	—		60	182	81

Continuing involvement (2):
Servicing rights recognized	$	193	32	378	52
Securities recognized (3)	—		39	1,363	30
Loans recognized	—		—	—	—
Nine months ended September 30,
Assets sold	$	64,438	11,439	123,719	11,866
Proceeds from transfer (1)	64,490		11,629	124,333	12,092
Net gains (losses) on sale	52		190	614	226

Continuing involvement (2):
Servicing rights recognized	$	833	102	1,272	123
Securities recognized (3)	2,062		176	17,757	98
Loans recognized	—		—	926	—

(1)Represents cash proceeds and the fair value of non-cash beneficial interests recognized at securitization settlement.

(2)Represents assets or liabilities recognized at securitization settlement date related to our continuing involvement in the transferred assets.

(3)Represents debt securities obtained at securitization settlement held for investment purposes that are classified as available-for-sale or held-to-maturity, which predominantly relate to agency securities. Excludes trading debt securities held temporarily for market-marking purposes, which are sold to third parties at or shortly after securitization settlement, of $3.0 billion and $13.3 billion during the third quarter and first nine months of 2022, respectively, and $13.6 billion and $31.6 billion during the third quarter and first nine months of 2021, respectively.

In the normal course of business we purchase certain

non-agency securities at initial securitization or subsequently in the secondary market, which we hold for investment. We also provide seller financing in the form of loans. We received cash flows of $95 million and $399 million during the third quarter and first nine months of 2022, respectively, and $116 million and $577 million during the third quarter and first nine months of 2021, respectively, related to principal and interest payments on these securities and loans, which exclude cash flows related to trading activities and to the sale of our student loan portfolio.

Table 8.2 presents the key weighted-average assumptions we used to initially measure residential MSRs recognized during the periods presented.

Table 8.2: Residential MSRs – Assumptions at Securitization Date



	2022			2021
Quarter ended September 30,
Prepayment rate (1)	15.0		%	14.8
Discount rate	8.5			5.4
Cost to service ($ per loan)	$	101		94
Nine months ended September 30,
Prepayment rate (1)	11.9		%	14.1
Discount rate	7.7			5.7
Cost to service ($ per loan)	$	114		89

(1)Includes a blend of prepayment speeds and expected defaults. Prepayment speeds are influenced by mortgage interest rates as well as our estimation of drivers of borrower behavior.

See Note 15 (Fair Values of Assets and Liabilities) and

Note 9 (Mortgage Banking Activities) for additional information on key economic assumptions for residential MSRs.

RESECURITIZATION ACTIVITIES We enter into resecuritization transactions as part of our trading activities to accommodate the investment and risk management activities of our customers. In resecuritization transactions, we transfer trading debt securities to VIEs in exchange for new beneficial interests that are sold to third parties at or shortly after securitization settlement. This activity is performed for customers seeking a specific return or risk profile. Substantially all of our transactions involve the resecuritization of conforming mortgage-backed securities issued by the GSEs or guaranteed by GNMA. We do not consolidate the resecuritization VIEs as we share in the decision-making power with third parties and do not hold significant economic interests in the VIEs other than for market-making activities. We transferred $15.7 billion and $33.8 billion of securities to re-securitization VIEs during the nine months ended September 30, 2022 and 2021, respectively. These amounts are not included in Table 8.1. Related total VIE assets were $113.8 billion and $117.7 billion at September 30, 2022, and December 31, 2021, respectively. As of September 30, 2022, and December 31, 2021 we held $1.0 billion and $817 million of securities, respectively. $622 million and $1.1 billion of these securities related to resecuritizations transacted during the nine months ended September 30, 2022 and 2021, respectively.

Loans Serviced for Others

Table 8.3 presents information about loans that we sold or securitized in which we have ongoing involvement as servicer. These are primarily residential mortgage loans in GSE or GNMA securitizations. 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 generally experience a loss only 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 8.3: Loans Serviced for Others


						Net charge-offs (2)
	Total loans			Delinquent loans and foreclosed assets (1)		Nine months ended September 30,
(in millions)	Sep 30, 2022		Dec 31, 2021	Sep 30, 2022	Dec 31, 2021	2022	2021
Commercial	$	122,716	120,962	1,298	1,923	24	123
Residential	665,158		690,813	5,801	10,714	13	16
Total off-balance sheet sold or securitized loans (3)	$	787,874	811,775	7,099	12,637	37	139

(1)Includes $339 million and $403 million of commercial foreclosed assets and $120 million and $129 million of residential foreclosed assets at September 30, 2022, and December 31, 2021, respectively.

(2)Net charge-offs exclude loans sold to Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (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 September 30, 2022, and December 31, 2021, the table includes total loans of $711.3 billion and $736.8 billion, delinquent loans of $5.3 billion and $10.2 billion, and foreclosed assets of $96 million and $100 million, respectively, for FNMA, FHLMC and GNMA.

Transactions with Unconsolidated VIEs

MORTGAGE LOAN SECURITIZATIONS Table 8.4 includes nonconforming mortgage loan securitizations where we originate and transfer the loans to the unconsolidated securitization VIEs that we sponsor. For additional information about these VIEs, see the “Loan Sales and Securitization Activity” section within this Note. Nonconforming mortgage loan securitizations also include commercial mortgage loan securitizations sponsored by third parties where we did not originate or transfer the loans but serve as master servicer and invest in securities that could be potentially significant to the VIE.

Conforming loan securitization and resecuritization transactions involving the GSEs and GNMA are excluded from Table 8.4 because we are not the sponsor or we do not have power over the activities most significant to the VIEs. Additionally, due to the nature of the guarantees provided by the GSEs and the FHA and VA, our credit risk associated with these VIEs is limited. For additional information about conforming mortgage loan securitizations and resecuritizations, see the “Loan Sales and Securitization Activity” and “Resecuritization Activities” sections within this Note.

TAX CREDIT STRUCTURES We co-sponsor and make investments in affordable housing projects that are designed to generate a return primarily through the realization of federal tax credits. The projects are typically managed by project sponsors who have the power over the VIE’s assets. In some instances, our investments in these structures may require that we fund future capital commitments at the discretion of the project sponsors.

COMMERCIAL REAL ESTATE LOANS We may transfer purchased industrial development bonds and GSE credit enhancements to VIEs in exchange for beneficial interests. We may also acquire such beneficial interests in transactions where we do not act as a transferor. We own all of the beneficial interests and may also service the underlying mortgages that serve as collateral to the bonds.

OTHER VIE STRUCTURES We engage in various forms of structured finance arrangements with other VIEs, including asset-backed finance structures and other securitizations collateralized by asset classes other than mortgages. Collateral may include rental properties, asset-backed securities, student loans and mortgage loans. We may participate in structuring or marketing the arrangements, as well as provide financing, service one or more of the underlying assets, or enter into derivatives with the VIEs. We may also receive fees for those services. We are not the primary beneficiary of these structures because we do not have power to direct the most significant activities of the VIEs.

Table 8.4 provides a summary of our exposure to the unconsolidated VIEs described above, which includes investments in securities, loans, guarantees, liquidity agreements, commitments and certain derivatives. We exclude certain transactions with unconsolidated VIEs when our continuing involvement is temporary or administrative in nature or insignificant in size.

In Table 8.4, “Total VIE assets” represents the remaining principal balance of assets held by unconsolidated VIEs using the most current information available. “Carrying value” is the amount in our consolidated balance sheet related to our involvement with the unconsolidated VIEs. “Maximum exposure to loss” is determined as the carrying value of our investment in the VIEs excluding the unconditional repurchase options that have not been exercised, plus the remaining undrawn liquidity and lending commitments, the notional amount of net written derivative contracts, and generally the notional amount of, or stressed loss estimate for, other commitments and guarantees.

Debt, guarantees and other commitments include amounts related to loans sold that we may be required to repurchase, or otherwise indemnify or reimburse the investor or insurer for losses incurred, due to material breach of contractual representations and warranties as well as other retained recourse arrangements. The maximum exposure to loss for material breach of contractual representations and warranties represents a stressed case estimate we utilize for determining stressed case regulatory capital needs and is considered to be a remote scenario.

“Maximum exposure to loss” represents estimated loss that would be incurred under severe, hypothetical circumstances, for which we believe the possibility is extremely remote, such as where the value of our interests and any associated collateral declines to zero, without any consideration of recovery or offset from any economic hedges. Accordingly, this disclosure is not an indication of expected loss.

Table 8.4: Unconsolidated VIEs


			Carrying value – asset (liability)
(in millions)	Total VIE assets		Loans		Debt securities (1)	Equity securities	All other assets (2)	Debt and other liabilities	Net assets
September 30, 2022


Nonconforming mortgage loan securitizations	$	153,831	—		2,468	—	610	(14)	3,064
Tax credit structures	45,130		1,864		—	12,182	—	(4,809)	9,237
Commercial real estate loans	5,632		5,619		—	—	13	—	5,632
Other	2,138		319		1	39	20	—	379
Total	$	206,731	7,802		2,469	12,221	643	(4,823)	18,312
			Maximum exposure to loss
			Loans		Debt securities (1)	Equity securities	All other assets (2)	Debt, guarantees, and other commitments	Total exposure


Nonconforming mortgage loan securitizations			$	—	2,468	—	610	14	3,092
Tax credit structures			1,864		—	12,182	—	3,749	17,795
Commercial real estate loans			5,619		—	—	13	706	6,338
Other			319		1	39	20	229	608
Total			$	7,802	2,469	12,221	643	4,698	27,833
			Carrying value – asset (liability)
(in millions)	Total VIE assets		Loans		Debt securities (1)	Equity securities	All other assets (2)	Debt and other liabilities	Net assets
December 31, 2021


Nonconforming mortgage loan securitizations	$	146,482	—		2,620	—	694	—	3,314
Tax credit structures	44,528		1,904		—	12,322	—	(4,941)	9,285
Commercial real estate loans	5,489		5,481		—	—	8	—	5,489
Other	3,196		531		3	62	49	(1)	644
Total	$	199,695	7,916		2,623	12,384	751	(4,942)	18,732
			Maximum exposure to loss
			Loans		Debt securities (1)	Equity securities	All other assets (2)	Debt, guarantees, and other commitments	Total exposure


Nonconforming mortgage loan securitizations			$	—	2,620	—	694	27	3,341
Tax credit structures			1,904		—	12,322	—	3,730	17,956
Commercial real estate loans			5,481		—	—	8	710	6,199
Other			531		3	62	49	229	874
Total			$	7,916	2,623	12,384	751	4,696	28,370

(1)Includes $216 million and $352 million of securities classified as trading at September 30, 2022, and December 31, 2021, respectively.

(2)All other assets includes mortgage servicing rights, derivative assets, and other assets (predominantly servicing advances).

Consolidated VIEs

We consolidate VIEs where we are the primary beneficiary. We are the primary beneficiary of the following structure types:

COMMERCIAL AND INDUSTRIAL LOANS AND LEASES We securitize dealer floor plan loans and leases in a revolving master trust entity and hold the subordinated notes and residual equity interests. As servicer and residual interest holder, we control the key decisions of the trust and consolidate the entity. The total VIE assets held by the master trust represent a majority of the total VIE assets presented for this category in Table 8.5. In a separate transaction structure, we also provide the majority of debt and equity financing to an SPE that engages in lending and leasing to specific vendors and service the underlying collateral.

OTHER VIE STRUCTURES Other VIEs are predominantly related to municipal tender option bond (MTOB) transactions. MTOBs are vehicles to finance the purchase of municipal bonds through the issuance of short-term debt to investors. Our involvement with MTOBs includes serving as the residual interest holder, which provides control over the key decisions of the VIE, as well as the

remarketing agent or liquidity provider related to the debt issued to investors. We may also securitize nonconforming mortgage loans, in which our involvement includes servicer of the underlying assets and holder of subordinate or senior securities issued by the VIE. During second quarter 2022, we purchased the outstanding mortgage loans from the VIEs and extinguished the related debt associated with such securitizations.

Table 8.5 presents a summary of financial assets and liabilities of our consolidated VIEs. The carrying value represents assets and liabilities recorded on our consolidated balance sheet. 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.”

On our consolidated balance sheet, we separately disclose (1) the consolidated assets of certain VIEs that can only be used to settle the liabilities of those VIEs, and (2) the consolidated liabilities of certain VIEs for which the VIE creditors do not have recourse to Wells Fargo.

Table 8.5: Transactions with Consolidated VIEs


			Carrying value – asset (liability)
(in millions)	Total VIE assets		Loans	Debt securities	All other assets (1)	Long-term debt	All other liabilities (2)
September 30, 2022
Commercial and industrial loans and leases	$	7,068	4,585	—	171	—	(163)
Other	72		—	71	1	—	(72)
Total consolidated VIEs	$	7,140	4,585	71	172	—	(235)
December 31, 2021
Commercial and industrial loans and leases	$	7,013	4,099	—	231	—	(188)
Other	516		377	71	3	(149)	(71)
Total consolidated VIEs	$	7,529	4,476	71	234	(149)	(259)

(1)All other assets includes cash and due from banks, interest-earning deposits with banks, derivative assets, equity securities, and other assets.

(2)All other liabilities includes short-term borrowings, derivative liabilities, and accrued expenses and other liabilities.

Other TransactionsIn addition to the transactions included in the previous tables, we have used wholly-owned trust preferred security VIEs to issue debt securities or preferred equity exclusively to third-party investors. As the sole assets of the VIEs are receivables from us, we do not consolidate the VIEs even though we own all of the voting equity shares of the VIEs, have fully guaranteed the obligations of the VIEs, and may have the right to redeem the third-party securities under certain circumstances. In our consolidated balance sheet we reported the debt securities issued to the VIEs as long-term junior subordinated debt with a carrying value of $398 million and $388 million at September 30, 2022, and December 31, 2021, respectively. See Note 16 (Preferred Stock) for additional information about trust preferred securities.