Bank of America Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Securitizations and Other Variable Interest Entities

Securitizations and Other Variable Interest Entities

3 Months Ended

Mar. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Securitizations and Other Variable Interest Entities

The Corporation utilizes VIEs in the ordinary course of business to support its own and its customers’ financing and investing needs. The tables in this Note present the assets and liabilities of consolidated and unconsolidated VIEs at March 31, 2022 and December 31, 2021 in situations where the Corporation has continuing involvement with transferred assets or if the Corporation otherwise has a variable interest in the VIE. The tables also present the Corporation’s maximum loss exposure at March 31, 2022 and December 31, 2021 resulting from its involvement with consolidated VIEs and unconsolidated VIEs in which the Corporation holds a variable interest. For more information on the Corporation’s use of VIEs and related maximum loss exposure, see Note 1 – Summary of Significant Accounting Principles and Note 6 – Securitizations and Other Variable Interest Entities to the Consolidated Financial Statements of the Corporation’s 2021 Annual Report on Form 10-K.

The Corporation invests in ABS issued by third-party VIEs with which it has no other form of involvement and enters into certain commercial lending arrangements that may also incorporate the use of VIEs, for example to hold collateral.

These securities and loans are included in Note 4 – Securities or Note 5 – Outstanding Loans and Leases and Allowance for Credit Losses. In addition, the Corporation has used VIEs in connection with its funding activities.

The Corporation did not provide financial support to consolidated or unconsolidated VIEs during the three months ended March 31, 2022 or the year ended December 31, 2021 that it was not previously contractually required to provide, nor does it intend to do so.

The Corporation had liquidity commitments, including written put options and collateral value guarantees, with certain unconsolidated VIEs of $958 million and $968 million at March 31, 2022 and December 31, 2021.

First-lien Mortgage Securitizations

As part of its mortgage banking activities, the Corporation securitizes a portion of the first-lien residential mortgage loans it originates or purchases from third parties. Except as described in Note 10 – Commitments and Contingencies, the Corporation does not provide guarantees or recourse to the securitization trusts other than standard representations and warranties.

The following table summarizes select information related to first-lien mortgage securitizations for the three months ended March 31, 2022 and 2021.



First-lien Mortgage Securitizations

	Residential Mortgage - Agency				Commercial Mortgage

	Three Months Ended March 31
(Dollars in millions)	2022		2021		2022		2021
Proceeds from loan sales (1)	$	2,322	$	1,243	$	2,428	$	665
Gains on securitizations (2)	8		2		13		33
Repurchases from securitization trusts (3)	32		80		—		—

(1)The Corporation transfers residential mortgage loans to securitizations sponsored primarily by the government-sponsored enterprises (GSEs) or Government National Mortgage Association (GNMA) in the normal course of business and primarily receives residential mortgage-backed securities in exchange. Substantially all of these securities are classified as Level 2 within the fair value hierarchy and are typically sold shortly after receipt.

(2)A majority of the first-lien residential mortgage loans securitized are initially classified as LHFS and accounted for under the fair value option. Gains recognized on these LHFS prior to securitization, which totaled $20 million and $33 million net of hedges, during the three months ended March 31, 2022 and 2021, respectively, are not included in the table above.

(3)The Corporation may have the option to repurchase delinquent loans out of securitization trusts, which reduces the amount of servicing advances it is required to make. The Corporation may also repurchase loans from securitization trusts to perform modifications. Repurchased loans include FHA-insured mortgages collateralizing GNMA securities.

The Corporation recognizes consumer mortgage servicing rights (MSRs) from the sale or securitization of consumer real estate loans. The unpaid principal balance of loans serviced for investors, including residential mortgage and home equity loans, totaled $110.4 billion and $149.7 billion at March 31, 2022 and 2021. Servicing fee and ancillary fee income on serviced loans was $70 million and $113 million during the three months ended March 31, 2022 and 2021. Servicing advances on serviced loans, including loans serviced for others and loans held for investment, were $1.9 billion and $2.0 billion at March 31, 2022 and December 31, 2021. For more information on MSRs, see Note 14 – Fair Value Measurements.

During the three months ended March 31, 2022, the Corporation deconsolidated agency residential mortgage securitization trusts with total assets of $527 million. There were no significant deconsolidations during the three months ended March 31, 2021.

The table below summarizes select information related to first-lien mortgage securitization trusts in which the Corporation held a variable interest at March 31, 2022 and December 31, 2021.



First-lien Mortgage VIEs

	Residential Mortgage
					Non-agency
	Agency				Prime				Subprime				Alt-A				Commercial Mortgage

(Dollars in millions)	March 31 2022		December 31 2021		March 31 2022		December 31 2021		March 31 2022		December 31 2021		March 31 2022		December 31 2021		March 31 2022		December 31 2021
Unconsolidated VIEs
Maximum loss exposure (1)	$	10,991	$	11,600	$	109	$	121	$	848	$	908	$	18	$	14	$	1,510	$	1,445
On-balance sheet assets
Senior securities:
Trading account assets	$	318	$	175	$	4	$	8	$	35	$	44	$	16	$	12	$	14	$	21
Debt securities carried at fair value	4,331		5,009		—		—		497		537		—		—		—
Held-to-maturity securities	6,342		6,416		—		—		—		—		—		—		1,242		1,157
All other assets	—		—		3		3		27		29		2		2		86		93
Total retained positions	$	10,991	$	11,600	$	7	$	11	$	559	$	610	$	18	$	14	$	1,342	$	1,271
Principal balance outstanding (2)	$	90,072	$	93,142	$	4,428	$	4,710	$	5,663	$	6,179	$	12,979	$	13,627	$	85,207	$	85,540

Consolidated VIEs
Maximum loss exposure (1)	$	1,434	$	1,644	$	38	$	49	$	—	$	—	$	—	$	—	$	—	$	—
On-balance sheet assets
Trading account assets	$	1,435	$	1,644	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans and leases, net	—		—		52		58		—		—		—		—		—		—



Total assets	$	1,435	$	1,644	$	52	$	58	$	—	$	—	$	—	$	—	$	—	$	—




Total liabilities	$	1	$	—	$	14	$	9	$	—	$	—	$	—	$	—	$	—	$	—

(1)Maximum loss exposure includes obligations under loss-sharing reinsurance and other arrangements for non-agency residential mortgage and commercial mortgage securitizations, but excludes the reserve for representations and warranties obligations and corporate guarantees and also excludes servicing advances and other servicing rights and obligations. For more information, see Note 10 – Commitments and Contingencies and Note 14 – Fair Value Measurements.

(2)Principal balance outstanding includes loans where the Corporation was the transferor to securitization VIEs with which it has continuing involvement, which may include servicing the loans.

Other Asset-backed Securitizations

The following table summarizes select information related to home equity, credit card and other asset-backed VIEs in which the Corporation held a variable interest at March 31, 2022 and December 31, 2021.



Home Equity Loan, Credit Card and Other Asset-backed VIEs

	Home Equity (1)				Credit Card (2)				Resecuritization Trusts				Municipal Bond Trusts


(Dollars in millions)	March 31 2022		December 31 2021		March 31 2022		December 31 2021		March 31 2022		December 31 2021		March 31 2022		December 31 2021
Unconsolidated VIEs
Maximum loss exposure	$	142	$	152	$	—	$	—	$	5,467	$	6,089	$	4,063	$	4,094
On-balance sheet assets
Securities (3):
Trading account assets	$	—	$	—	$	—	$	—	$	933	$	1,030	$	—	$	—
Debt securities carried at fair value	1		1		—		—		1,622		1,903		—		—
Held-to-maturity securities	—		—		—		—		2,912		3,156		—		—


Total retained positions	$	1	$	1	$	—	$	—	$	5,467	$	6,089	$	—	$	—
Total assets of VIEs	$	398	$	430	$	—	$	—	$	15,939	$	18,633	$	4,616	$	4,655

Consolidated VIEs
Maximum loss exposure	$	41	$	45	$	9,809	$	10,279	$	164	$	680	$	209	$	210
On-balance sheet assets
Trading account assets	$	—	$	—	$	—	$	—	$	171	$	686	$	121	$	122

Loans and leases	127		140		13,649		14,434		—		—		—		—
Allowance for loan and lease losses	13		14		(891)		(970)		—		—		—		—

All other assets	3		3		304		70		—		—		88		88
Total assets	$	143	$	157	$	13,062	$	13,534	$	171	$	686	$	209	$	210
On-balance sheet liabilities
Short-term borrowings	$	—	$	—	$	—	$	—	$	—	$	—	$	196	$	196
Long-term debt	103		113		3,248		3,248		7		6		—		—
All other liabilities	—		—		5		7		—		—		—		—
Total liabilities	$	103	$	113	$	3,253	$	3,255	$	7	$	6	$	196	$	196

(1)For unconsolidated home equity loan VIEs, the maximum loss exposure includes outstanding trust certificates issued by trusts in rapid amortization, net of recorded reserves. For both consolidated and unconsolidated home equity loan VIEs, the maximum loss exposure excludes the reserve for representations and warranties obligations and corporate guarantees. For more information, see Note 10 – Commitments and Contingencies.

(2)At March 31, 2022 and December 31, 2021, loans and leases in the consolidated credit card trust included $3.8 billion and $4.3 billion of seller’s interest.

(3)The retained senior securities were valued using quoted market prices or observable market inputs (Level 2 of the fair value hierarchy).

Home Equity Loans

The Corporation retains interests, primarily senior securities, in home equity securitization trusts to which it transferred home equity loans. In addition, the Corporation may be obligated to provide subordinate funding to the trusts during a rapid amortization event. This obligation is included in the maximum loss exposure in the table above. The charges that will ultimately be recorded as a result of the rapid amortization events depend on the undrawn portion of the home equity lines of credit, performance of the loans, the amount of subsequent draws and the timing of related cash flows.

Credit Card Securitizations

The Corporation securitizes originated and purchased credit card loans. The Corporation’s continuing involvement with the securitization trust includes servicing the receivables, retaining an undivided interest (seller’s interest) in the receivables, and holding certain retained interests, including subordinate interests in accrued interest and fees on the securitized receivables and cash reserve accounts.

No new senior debt securities were issued to third-party investors from the credit card securitization trust during the three months ended March 31, 2022 and 2021.

At both March 31, 2022 and December 31, 2021, the Corporation held subordinate securities issued by the credit card securitization trust with a notional principal amount of $6.5 billion. These securities serve as a form of credit enhancement to the senior debt securities and have a stated interest rate of zero percent. No subordinate securities were issued by the credit card securitization trust during the three months ended March 31, 2022 and 2021.

Resecuritization Trusts

The Corporation transfers securities, typically MBS, into resecuritization VIEs generally at the request of customers seeking securities with specific characteristics. Generally, there are no significant ongoing activities performed in a resecuritization trust, and no single investor has the unilateral ability to liquidate the trust.

The Corporation resecuritized $9.5 billion and $1.0 billion of securities during the three months ended March 31, 2022 and 2021. Securities transferred into resecuritization VIEs were measured at fair value with changes in fair value recorded in market making and similar activities prior to the resecuritization and, accordingly, no gain or loss on sale was recorded. During the three months ended March 31, 2022 and 2021, resecuritization proceeds included securities with an initial fair value of $699 million and $178 million, of which substantially all of the securities were classified as trading account assets for both periods. Trading account securities carried at fair value were largely categorized as Level 2 within the fair value hierarchy.

Municipal Bond Trusts

The Corporation administers municipal bond trusts that hold highly-rated, long-term, fixed-rate municipal bonds. The trusts obtain financing by issuing floating-rate trust certificates that reprice on a weekly or other short-term basis to third-party investors.

The Corporation’s liquidity commitments to unconsolidated municipal bond trusts, including those for which the Corporation was transferor, totaled $4.1 billion at both March 31, 2022 and December 31, 2021. The weighted-average remaining life of bonds held in the trusts at March 31, 2022 was 6.2 years. There were no significant write-downs or downgrades of assets or issuers during the three months ended March 31, 2022 and 2021.

Other Variable Interest Entities

The table below summarizes select information related to other VIEs in which the Corporation held a variable interest at March 31, 2022 and December 31, 2021.



Other VIEs


	Consolidated		Unconsolidated		Total		Consolidated		Unconsolidated		Total

(Dollars in millions)	March 31, 2022						December 31, 2021
Maximum loss exposure	$	2,355	$	28,633	$	30,988	$	4,819	$	27,790	$	32,609
On-balance sheet assets
Trading account assets	$	433	$	640	$	1,073	$	2,552	$	626	$	3,178
Debt securities carried at fair value	—		6		6		—		7		7
Loans and leases	2,118		70		2,188		2,503		47		2,550
Allowance for loan and lease losses	(2)		(12)		(14)		(2)		(12)		(14)


All other assets	22		27,438		27,460		28		26,628		26,656
Total	$	2,571	$	28,142	$	30,713	$	5,081	$	27,296	$	32,377
On-balance sheet liabilities

Short-term borrowings	$	32	$	—	$	32	$	51	$	—	$	51
Long-term debt	184		—		184		211		—		211
All other liabilities	1		6,667		6,668		—		6,548		6,548
Total	$	217	$	6,667	$	6,884	$	262	$	6,548	$	6,810
Total assets of VIEs	$	2,571	$	94,304	$	96,875	$	5,081	$	92,249	$	97,330

Customer VIEs

Customer VIEs include credit-linked, equity-linked and commodity-linked note VIEs, repackaging VIEs and asset acquisition VIEs, which are typically created on behalf of customers who wish to obtain market or credit exposure to a specific company, index, commodity or financial instrument.

The Corporation’s maximum loss exposure to consolidated and unconsolidated customer VIEs totaled $1.1 billion and $2.9 billion at March 31, 2022 and December 31, 2021, including the notional amount of derivatives to which the Corporation is a counterparty, net of losses previously recorded, and the Corporation’s investment, if any, in securities issued by the VIEs.

Collateralized Debt Obligation VIEs

The Corporation receives fees for structuring CDO VIEs, which hold diversified pools of fixed-income securities, typically corporate debt or ABS, which the CDO VIEs fund by issuing multiple tranches of debt and equity securities. CDOs are generally managed by third-party portfolio managers. The Corporation typically transfers assets to these CDOs, holds securities issued by the CDOs and may be a derivative counterparty to the CDOs. The Corporation’s maximum loss exposure to consolidated and unconsolidated CDOs totaled $205 million and $235 million at March 31, 2022 and December 31, 2021.

Investment VIEs

The Corporation sponsors, invests in or provides financing, which may be in connection with the sale of assets, to a variety of investment VIEs that hold loans, real estate, debt securities or other financial instruments and are designed to provide the desired investment profile to investors or the Corporation. At March 31, 2022 and December 31, 2021, the Corporation’s

consolidated investment VIEs had total assets of $652 million and $1.0 billion. The Corporation also held investments in unconsolidated VIEs with total assets of $7.7 billion and $7.1 billion at March 31, 2022 and December 31, 2021. The Corporation’s maximum loss exposure associated with both consolidated and unconsolidated investment VIEs totaled $1.7 billion and $2.0 billion at March 31, 2022 and December 31, 2021 comprised primarily of on-balance sheet assets less non-recourse liabilities.

Leveraged Lease Trusts

The Corporation’s net investment in consolidated leveraged lease trusts totaled $1.5 billion at both March 31, 2022 and December 31, 2021. The trusts hold long-lived equipment such as rail cars, power generation and distribution equipment, and commercial aircraft. The Corporation structures the trusts and holds a significant residual interest. The net investment represents the Corporation’s maximum loss exposure to the trusts in the unlikely event that the leveraged lease investments become worthless. Debt issued by the leveraged lease trusts is non-recourse to the Corporation.

Tax Credit VIEs

The Corporation holds investments in unconsolidated limited partnerships and similar entities that construct, own and operate affordable housing, wind and solar projects. An unrelated third party is typically the general partner or managing member and has control over the significant activities of the VIE. The Corporation earns a return primarily through the receipt of tax credits allocated to the projects. The maximum loss exposure included in the Other VIEs table was $26.3 billion and $25.7 billion at March 31, 2022 and December 31, 2021. The Corporation’s risk of loss is generally mitigated by policies requiring that the project qualify for the expected tax credits prior to making its investment.

The Corporation’s investments in affordable housing partnerships, which are reported in other assets on the Consolidated Balance Sheet, totaled $12.9 billion and $12.6 billion, including unfunded commitments to provide capital contributions of $5.9 billion and $5.8 billion, at March 31, 2022 and December 31, 2021. The unfunded commitments are expected to be paid over the next five years. During the three months ended March 31, 2022 and 2021, the Corporation recognized tax credits and other tax benefits from investments in affordable housing partnerships of $373 million and $393 million and reported pretax losses in other income of $313 million and $276 million. These tax credits are recognized as part of the Corporation’s annual effective tax rate used to determine tax expense in a given quarter. The Corporation may be asked to invest additional amounts to support a troubled affordable housing project. Such additional investments have not been and are not expected to be significant.