Quarterly report pursuant to Section 13 or 15(d)

Securitizations and Other Variable Interest Entities

v3.24.2
Securitizations and Other Variable Interest Entities
 6 Months Ended
Jun. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Securitizations and Other Variable Interest Entities 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 Corporation routinely securitizes loans and debt securities using VIEs as a source of funding for the Corporation and as a means of transferring the economic risk of the loans or debt securities to third parties. The assets are transferred into a trust or other securitization vehicle such that the assets are legally isolated from the creditors of the Corporation and are not available to satisfy its obligations. These assets can only be
used to settle obligations of the trust or other securitization vehicle. The Corporation also administers, structures or invests in other VIEs including CDOs, investment vehicles and other entities. For more information on the Corporation’s use of VIEs, 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 2023 Annual Report on Form 10-K.
The tables in this Note present the assets and liabilities of consolidated and unconsolidated VIEs at June 30, 2024 and December 31, 2023 in situations where the Corporation has a loan or security interest and involvement with transferred assets
or if the Corporation otherwise has an additional interest in the VIE. The tables also present the Corporation’s maximum loss exposure at June 30, 2024 and December 31, 2023 resulting from its involvement with consolidated VIEs and unconsolidated VIEs. The Corporation’s maximum loss exposure is based on the unlikely event that all of the assets in the VIEs become worthless and incorporates not only potential losses associated with assets recorded on the Consolidated Balance Sheet but also potential losses associated with off-balance sheet commitments, such as unfunded liquidity commitments and other contractual arrangements. The Corporation’s maximum loss exposure does not include losses previously recognized through write-downs of assets.
The Corporation invests in ABS, CLOs and other similar investments issued by third-party VIEs with which it has no other form of involvement other than a loan or debt security issued by the VIE. In addition, the Corporation also enters into certain commercial lending arrangements that may utilize VIEs for activities secondary to the lending arrangement, for example to hold collateral. The Corporation’s maximum loss exposure to these VIEs is the investment balances. These securities and loans are included in Note 4 – Securities or Note 5 – Outstanding Loans and Leases and Allowance for Credit Losses and are not included in the following tables.
The Corporation did not provide financial support to consolidated or unconsolidated VIEs during the three and six months ended June 30, 2024 or the year ended December 31, 2023 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 $957 million and $989 million at June 30, 2024 and December 31, 2023.
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, generally in the form of residential mortgage-backed securities (RMBS) guaranteed by government-sponsored enterprises, FNMA and FHLMC (collectively the GSEs), or the Government National Mortgage Association (GNMA) primarily in the case of FHA-insured and U.S. Department of Veterans Affairs (VA)-guaranteed mortgage loans. Securitization usually occurs in conjunction with or shortly after origination or purchase, and the Corporation may also securitize loans held in its residential mortgage portfolio. In addition, the Corporation may, from time to time, securitize commercial mortgages it originates or purchases from other entities. The Corporation typically services the loans it securitizes. Further, the Corporation may retain beneficial interests in the securitization trusts including senior and subordinate securities and equity tranches issued by the trusts. 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 table below summarizes select information related to first-lien mortgage securitizations for the three and six months ended June 30, 2024 and 2023.
First-lien Mortgage Securitizations
Residential Mortgage - Agency Commercial Mortgage
Three Months Ended June 30 Six Months Ended June 30 Three Months Ended June 30 Six Months Ended June 30
(Dollars in millions) 2024 2023 2024 2023 2024 2023 2024 2023
Proceeds from loan sales (1)
$ 964  $ 908  $ 2,173  $ 2,255  $ 5,723  $ 455  $ 7,032  $ 597 
Gains (losses) on securitizations (2)
(2) 1  (2) (4) 69  (1) 88  2 
Repurchases from securitization trusts (3)
8  5  16  14  —  —  —  — 
(1)The Corporation transfers residential mortgage loans to securitizations sponsored primarily by the GSEs or 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 $8 million and $13 million, net of hedges, during the three and six months ended June 30, 2024 compared to $7 million and $17 million for the same periods in 2023, 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 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 $88.2 billion and $95.9 billion at June 30, 2024 and 2023. Servicing fee and ancillary fee income on serviced loans was $58 million and $120 million during the three and six months ended June 30, 2024 compared to $63 million and $132 million for the same periods in 2023. Servicing advances on serviced loans, including loans serviced for others and loans held for investment, were $1.1 billion and $1.3 billion at June 30, 2024 and December 31, 2023. For more information on MSRs, see Note 14 – Fair Value Measurements.
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 preceding table. 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.
Mortgage and Home Equity Securitizations
During the three and six months ended June 30, 2024, the Corporation deconsolidated agency residential mortgage securitization trusts with total assets of $32 million and $825 million compared to $296 million and $624 million for the same periods in 2023.
The following table summarizes select information related to mortgage and home equity securitization trusts in which the Corporation held a variable interest and had continuing involvement at June 30, 2024 and December 31, 2023.
Mortgage and Home Equity Securitizations
Residential Mortgage    
      Non-agency    
  Agency Prime and Alt-A Subprime
Home Equity (3)
Commercial Mortgage
(Dollars in millions) June 30
2024		 December 31
2023		 June 30
2024		 December 31
2023		 June 30
2024		 December 31
2023		 June 30
2024		 December 31
2023		 June 30
2024		 December 31
2023
Unconsolidated VIEs                    
Maximum loss exposure (1)
$ 7,836  $ 8,190  $ 86  $ 92  $ 602  $ 657  $ —  $ —  $ 1,622  $ 1,558 
On-balance sheet assets
                    
Senior securities:
                    
Trading account assets
 $ 275  $ 235  $ 10  $ 13  $ 20  $ 20  $ —  $ —  $ 238  $ 70 
Debt securities carried at fair value
 2,345  2,541  —  —  290  341  —  —  —  — 
Held-to-maturity securities
 5,216  5,414  —  —  —  —  —  —  1,262  1,287 
All other assets —  —  2  4  22  23  —  —  32  79 
Total retained positions
 $ 7,836  $ 8,190  $ 12  $ 17  $ 332  $ 384  $ —  $ —  $ 1,532  $ 1,436 
Principal balance outstanding (2)
$ 72,470  $ 76,134  $ 13,336  $ 13,963  $ 4,454  $ 4,508  $ 208  $ 252  $ 88,813  $ 80,078 
Consolidated VIEs                    
Maximum loss exposure (1)
$ 1,115  $ 1,164  $ —  $ —  $ —  $ —  $ 11  $ 12  $ —  $ — 
On-balance sheet assets
                    
Trading account assets
 $ 1,115  $ 1,171  $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ — 
Loans and leases —  —  —  —  —  —  27  31  —  — 
Allowance for loan and lease
   losses		 —  —  —  —  —  —  6  7  —  — 
All other assets —  —  —  —  —  —  1  1  —  — 
Total assets $ 1,115  $ 1,171  $ —  $ —  $ —  $ —  $ 34  $ 39  $ —  $ — 
Total liabilities $ —  $ 7  $ —  $ —  $ —  $ —  $ 23  $ 27  $ —  $ — 
(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.
(3)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.
Other Asset-backed Securitizations
The following paragraphs summarize select information related to other asset-backed VIEs in which the Corporation had a variable interest at June 30, 2024 and December 31, 2023.
Credit Card and Automobile Loan Securitizations
The Corporation securitizes originated and purchased credit card and automobile loans as a source of financing. The loans are sold on a non-recourse basis to consolidated trusts. The securitizations are ongoing, whereas additional receivables will be funded into the trusts by either loan repayments or proceeds from securities issued to third parties, depending on the securitization structure. The Corporation’s continuing involvement with the securitization trusts includes servicing the receivables and holding various subordinated interests, including an undivided seller’s interest in the credit card receivables and owning certain retained interests.
At June 30, 2024 and December 31, 2023, the carrying values of the receivables in the trusts totaled $18.7 billion and $16.6 billion, which are included in loans and leases, and the carrying values of senior debt securities that were issued to third-party investors from the trusts totaled $8.6 billion and $7.8 billion, which are included in long-term debt.
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 $3.8 billion and $6.6 billion of securities during the three and six months ended June 30, 2024 compared to $4.1 billion and $5.8 billion for the same
periods in 2023. 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 and six months ended June 30, 2024, resecuritization proceeds included securities with an initial fair value of $795 million and $883 million, compared to $478 million and $1.1 billion for the same periods in 2023, of which substantially all of the securities were classified as trading account assets for both periods. Substantially all of the trading account securities carried at fair value were categorized as Level 2 within the fair value hierarchy.
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 involvement in the VIE is limited to its loss exposure. The Corporation’s maximum loss exposure to consolidated and unconsolidated customer VIEs totaled $1.0 billion and $952 million at June 30, 2024 and December 31, 2023, 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.
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 $1.8 billion and $1.7 billion at June 30, 2024 and December 31, 2023. The weighted-average remaining life of bonds held in the trusts at June 30, 2024 was 11.8 years. There were no significant write-downs or downgrades of assets or issuers during the six months ended June 30, 2024 and 2023.
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 $80 million at both June 30, 2024 and December 31, 2023.
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 June 30, 2024 and December 31, 2023, the Corporation’s consolidated investment VIEs had total assets of $3 million and $472 million. The Corporation also held investments in unconsolidated VIEs with total assets of $20.7 billion and $18.4 billion at June 30, 2024 and December 31, 2023. The Corporation’s maximum loss exposure associated with both consolidated and unconsolidated investment VIEs totaled $2.2 billion and $2.6 billion at June 30, 2024 and December 31, 2023 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 $1.1 billion at both June 30, 2024 and December 31, 2023. 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.
The table below summarizes the maximum loss exposure and assets held by the Corporation that related to other asset-backed VIEs at June 30, 2024 and December 31, 2023.
Other Asset-backed VIEs
 
Credit Card and
 Automobile (1)
Resecuritization Trusts and Customer VIEs Municipal Bond Trusts
and CDOs		 Investment VIEs and Leveraged Lease Trusts
(Dollars in millions) June 30
2024		 December 31
2023		 June 30
2024		 December 31
2023		 June 30
2024		 December 31
2023		 June 30
2024		 December 31
2023
Unconsolidated VIEs        
Maximum loss exposure $ —  $ —  $ 5,037  $ 4,494  $ 1,874  $ 1,787  $ 2,160  $ 2,197 
On-balance sheet assets        
Securities (2):
       
Trading account assets $ —  $ —  $ 1,301  $ 626  $ 25  $ 23  $ 298  $ 469 
Debt securities carried at fair value
 —  —  852  920  —  —  4  4 
Held-to-maturity securities —  —  2,110  2,237  —  —  —  — 
Loans and leases —  —  —  —  —  —  68  90 
Allowance for loan and lease losses —  —  —  —  —  —  (4) (12)
All other assets —  —  774  711  6  7  1,299  1,168 
Total retained positions $ —  $ —  $ 5,037  $ 4,494  $ 31  $ 30  $ 1,665  $ 1,719 
Total assets of VIEs $ —  $ —  $ 16,727  $ 15,862  $ 7,531  $ 9,279  $ 20,708  $ 18,398 
Consolidated VIEs        
Maximum loss exposure $ 9,433  $ 8,127  $ 497  $ 1,240  $ 3,539  $ 3,136  $ 1,084  $ 1,596 
On-balance sheet assets        
Trading account assets $ —  $ —  $ 1,018  $ 1,798  $ 3,512  $ 3,084  $ 2  $ 1 
Debt securities carried at fair value —  —  —  —  27  52  —  — 
Loans and leases 18,729  16,640  —  —  —  —  1,071  1,605 
Allowance for loan and lease losses
 (922) (832) —  —  —  —  (1) (1)
All other assets 200  163  39  38  —  —  14  15 
Total assets $ 18,007  $ 15,971  $ 1,057  $ 1,836  $ 3,539  $ 3,136  $ 1,086  $ 1,620 
On-balance sheet liabilities        
Short-term borrowings
 $ —  $ —  $ —  $ —  $ 3,343  $ 2,934  $ —  $ 23 
Long-term debt 8,552  7,825  560  596  —  —  2  1 
All other liabilities 22  19  —  —  —  —  —  — 
Total liabilities $ 8,574  $ 7,844  $ 560  $ 596  $ 3,343  $ 2,934  $ 2  $ 24 
(1)At June 30, 2024 and December 31, 2023 loans and leases in the consolidated credit card trust included $4.4 billion and $3.2 billion of seller’s interest.
(2)The retained senior securities were valued using quoted market prices or observable market inputs (Level 2 of the fair value hierarchy).
Tax Credit VIEs
The Corporation holds equity investments in unconsolidated limited partnerships and similar entities that construct, own and operate affordable housing, renewable energy and certain other projects. The total assets of these unconsolidated tax credit VIEs were $83.3 billion and $84.1 billion as of June 30, 2024 and December 31, 2023. An unrelated third party is typically the general partner or managing member and has control over the significant activities of the VIE. As an investor, tax credits
associated with the investments in these entities are allocated to the Corporation, as provided by the U.S. Internal Revenue Code and related regulations, and are recognized as income tax benefits in the Corporation’s Consolidated Statement of Income in the year they are earned, which varies based on the type of investments. Tax credits from investments in affordable housing are recognized ratably over a term of up to 10 years, and tax credits from renewable energy investments are recognized either at inception for transactions electing Investment Tax Credits
(ITCs) or as energy is produced for transactions electing Production Tax Credits (PTCs), which is generally up to a 10-year time period. The volume and types of investments held by the Corporation will influence the amount of tax credits recognized each period.
The Corporation’s equity investments in affordable housing and other projects totaled $16.2 billion and $15.8 billion at June 30, 2024 and December 31, 2023, which included unfunded capital contributions of $7.4 billion and $7.2 billion that are probable to be paid over the next five years. 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. During the three and six months ended June 30, 2024, the Corporation recognized tax credits and other tax benefits related to affordable housing equity investments of $562 million and $1.1 billion compared to $517 million and $1.0 billion for the same periods in 2023, and reported pretax losses in other income of $409 million and $822 million compared to $383 million and $756 million for the same periods in 2023. The Corporation’s equity investments in renewable energy totaled $13.4 billion and $14.2 billion at June 30, 2024 and December 31, 2023. In addition, the Corporation had unfunded capital contributions for renewable energy investments of $5.5 billion and $6.2 billion at June 30, 2024 and December 31, 2023, which are contingent on various conditions precedent to funding over the next two years. The Corporation’s risk of loss is generally mitigated by policies requiring the project to qualify for the expected tax credits prior to making its investment. During the three and six months ended June 30, 2024, the Corporation recognized tax credits and other tax benefits related to renewable energy equity investments of $894 million and $1.9 billion compared to $1.1 billion and $2.1 billion for the same periods in 2023 and reported pretax losses in other income of $591 million and $1.3 billion compared to $567 million and $1.1 billion for the same periods in 2023. The Corporation may also enter into power purchase agreements with renewable energy tax credit entities.
The following table summarizes select information related to unconsolidated tax credit VIEs in which the Corporation held a variable interest at June 30, 2024 and December 31, 2023.
Unconsolidated Tax Credit VIEs
(Dollars in millions) June 30
2024		 December 31
2023
Maximum loss exposure $ 29,594  $ 30,040 
On-balance sheet assets    
All other assets $ 29,594  $ 30,040 
Total $ 29,594  $ 30,040 
On-balance sheet liabilities    
All other liabilities $ 7,396  $ 7,254 
Total $ 7,396  $ 7,254 
Total assets of VIEs $ 83,334  $ 84,148