Quarterly report pursuant to Section 13 or 15(d)

Securitizations and Other Variable Interest Entities

v2.4.0.8
Securitizations and Other Variable Interest Entities
 9 Months Ended
Sep. 30, 2013
Securitizations and Other Variable Interest Entities [Abstract]  
Securitizations And Other Variable Interest Entities Disclosure
NOTE 7 – 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 utilization of VIEs, see Note 1 – Summary of Significant Accounting Principles and Note 7 – Securitizations and Other Variable Interest Entities to the Consolidated Financial Statements of the Corporation's 2012 Annual Report on Form 10-K.

The tables within this Note present the assets and liabilities of consolidated and unconsolidated VIEs at September 30, 2013 and December 31, 2012, 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 September 30, 2013 and December 31, 2012 resulting from its involvement with consolidated VIEs and unconsolidated VIEs in which the Corporation holds a variable interest. 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 asset-backed securities (ABS) issued by third-party VIEs with which it has no other form of involvement. These securities are included in Note 2 – Trading Account Assets and Liabilities and Note 4 – Securities. In addition, the Corporation uses VIEs such as trust preferred securities trusts in connection with its funding activities. For additional information, see Note 12 – Long-term Debt to the Consolidated Financial Statements of the Corporation's 2012 Annual Report on Form 10-K. The Corporation also uses VIEs in the form of synthetic securitization vehicles to mitigate a portion of the credit risk on its residential mortgage loan portfolio, as described in Note 5 – Outstanding Loans and Leases. The Corporation uses VIEs, such as cash funds managed within Global Wealth & Investment Management (GWIM), to provide investment opportunities for clients. These VIEs, which are not consolidated by the Corporation, are not included in the tables within this Note.

Except as described below and in Note 7 – Securitizations and Other Variable Interest Entities to the Consolidated Financial Statements of the Corporation's 2012 Annual Report on Form 10-K, the Corporation did not provide financial support to consolidated or unconsolidated VIEs during the three and nine months ended September 30, 2013 or the year ended December 31, 2012 that it was not previously contractually required to provide, nor does it intend to do so.

Mortgage-related Securitizations

First-lien Mortgages

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 MBS guaranteed by government-sponsored enterprises, FNMA and FHLMC (collectively the GSEs), or GNMA 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 loan closing or purchase. 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 below and in Note 8 – Representations and Warranties Obligations and Corporate Guarantees, 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 nine months ended September 30, 2013 and 2012.

First-lien Mortgage Securitizations
 
 
 
Three Months Ended September 30
 
Residential
Mortgage - Agency
 
Commercial Mortgage
(Dollars in millions)
2013
2012
 
2013
2012
Cash proceeds from new securitizations (1)
$
14,068

$
12,461

 
$
—

$
335

Gain (loss) on securitizations (2)
36

(89
)
 
—

—

 
 
 
 
 
 
 
Nine Months Ended September 30
 
2013
2012
 
2013
2012
Cash proceeds from new securitizations (1)
$
41,444

$
27,688

 
$
208

$
660

Gain (loss) on securitizations (2)
92

(151
)
 
—

—

(1) 
The Corporation sells residential mortgage loans to GSEs in the normal course of business and receives MBS in exchange which may then be sold into the market to third-party investors for cash proceeds.
(2) 
Substantially all of the first-lien residential mortgage loans securitized are initially classified as LHFS and accounted for under the fair value option. As such, gains are recognized on these LHFS prior to securitization. The Corporation recognized $379 million and $1.7 billion of gains, net of hedges, on loans securitized during the three and nine months ended September 30, 2013 compared to $563 million and $1.3 billion for the same periods in 2012.

In addition to cash proceeds as reported in the table above, the Corporation received securities with an initial fair value of $490 million and $3.0 billion in connection with first-lien mortgage securitizations for the three and nine months ended September 30, 2013 compared to $315 million and $2.5 billion for the same periods in 2012. All of these securities were initially classified as Level 2 assets within the fair value hierarchy. During the three and nine months ended September 30, 2013 and 2012, there were no changes to the initial classification.

The Corporation recognizes consumer MSRs from the sale or securitization of first-lien mortgage loans. Servicing fee and ancillary fee income on consumer mortgage loans serviced, including securitizations where the Corporation has continuing involvement, were $674 million and $2.3 billion during the three and nine months ended September 30, 2013 compared to $1.1 billion and $3.6 billion for the same periods in 2012. Servicing advances on consumer mortgage loans, including securitizations where the Corporation has continuing involvement, were $15.5 billion and $23.2 billion at September 30, 2013 and December 31, 2012. 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. During the three and nine months ended September 30, 2013, $3.1 billion and $9.4 billion of loans were repurchased from first-lien securitization trusts as a result of loan delinquencies or in order to perform modifications compared to $2.5 billion and $5.2 billion for the same periods in 2012. The majority of these loans repurchased were FHA-insured mortgages collateralizing GNMA securities. For more information on MSRs, see Note 19 – Mortgage Servicing Rights.

The table below summarizes select information related to first-lien mortgage securitization trusts in which the Corporation held a variable interest at September 30, 2013 and December 31, 2012.

First-lien Mortgage VIEs
 
 
 
 
 
 
 
 
Residential Mortgage
 
 
 
 
 
 
Non-agency
 
 
 
Agency
 
Prime
 
Subprime
 
Alt-A
 
Commercial Mortgage
(Dollars in millions)
September 30
2013
December 31
2012
 
September 30
2013
December 31
2012
 
September 30
2013
December 31
2012
 
September 30
2013
December 31
2012
 
September 30
2013
December 31
2012
Unconsolidated VIEs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum loss exposure (1)
$
21,362

$
28,591

 
$
1,623

$
2,038

 
$
407

$
410

 
$
448

$
367

 
$
607

$
702

On-balance sheet assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior securities held (2):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading account assets
$
976

$
619

 
$
—

$
16

 
$
8

$
14

 
$
1

$
—

 
$
18

$
12

Debt securities carried at fair value
19,825

26,421

 
1,088

1,388

 
219

210

 
119

128

 
359

581

Subordinate securities held (2):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading account assets
—

—

 
—

—

 
7

3

 
—

—

 
18

13

Debt securities carried at fair value
—

—

 
17

21

 
7

9

 
—

—

 
—

—

Residual interests held
—

—

 
13

18

 
—

9

 
—

—

 
177

40

All other assets (3)
561

1,551

 
75

64

 
1

1

 
328

239

 
—

—

Total retained positions
$
21,362

$
28,591

 
$
1,193

$
1,507

 
$
242

$
246

 
$
448

$
367

 
$
572

$
646

Principal balance outstanding (4)
$
479,193

$
797,315

 
$
29,592

$
45,819

 
$
34,084

$
53,822

 
$
54,045

$
71,990

 
$
21,883

$
56,733

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated VIEs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum loss exposure (1)
$
42,509

$
46,959

 
$
102

$
104

 
$
389

$
390

 
$
—

$
—

 
$
—

$
—

On-balance sheet assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading account assets
$
927

$
—

 
$
—

$
—

 
$
—

$
—

 
$
—

$
—

 
$
—

$
—

Loans and leases
41,114

45,991

 
247

283

 
811

722

 
—

—

 
—

—

Allowance for loan and lease losses
(3
)
(4
)
 
—

—

 
—

—

 
—

—

 
—

—

Loans held-for-sale
—

—

 
—

—

 
760

914

 
—

—

 
—

—

All other assets
478

972

 
—

10

 
4

91

 
—

—

 
—

—

Total assets
$
42,516

$
46,959

 
$
247

$
293

 
$
1,575

$
1,727

 
$
—

$
—

 
$
—

$
—

On-balance sheet liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term borrowings
$
—

$
—

 
$
—

$
—

 
$
762

$
741

 
$
—

$
—

 
$
—

$
—

Long-term debt
7

—

 
168

212

 
804

941

 
—

—

 
—

—

Total liabilities
$
7

$
—

 
$
168

$
212

 
$
1,566

$
1,682

 
$
—

$
—

 
$
—

$
—

(1) 
Maximum loss exposure excludes the liability for representations and warranties obligations and corporate guarantees and also excludes servicing advances and MSRs. For additional information, see Note 8 – Representations and Warranties Obligations and Corporate Guarantees and Note 19 – Mortgage Servicing Rights.
(2) 
As a holder of these securities, the Corporation receives scheduled principal and interest payments. During the three and nine months ended September 30, 2013 and 2012, there were no OTTI losses recorded on those securities classified as AFS debt securities.
(3) 
Not included in the table above are all other assets of $2.3 billion and $12.1 billion, representing the unpaid principal balance of mortgage loans eligible for repurchase from unconsolidated residential mortgage securitization vehicles, principally guaranteed by GNMA, and all other liabilities of $2.3 billion and $12.1 billion, representing the principal amount that would be payable to the securitization vehicles if the Corporation were to exercise the repurchase option, at September 30, 2013 and December 31, 2012.
(4) 
Principal balance outstanding includes loans the Corporation transferred with which the Corporation has continuing involvement, which may include servicing the loans.

Home Equity Loans

The Corporation retains interests in home equity securitization trusts to which it transferred home equity loans. These retained interests include senior and subordinate securities and residual interests. In addition, the Corporation may be obligated to provide subordinate funding to the trusts during a rapid amortization event. The Corporation also services the loans in the trusts. Except as described below and in Note 8 – Representations and Warranties Obligations and Corporate Guarantees, the Corporation does not provide guarantees or recourse to the securitization trusts other than standard representations and warranties. There were no securitizations of home equity loans during the three and nine months ended September 30, 2013 and 2012, and all of the home equity trusts have entered the rapid amortization phase.

The table below summarizes select information related to home equity loan securitization trusts in which the Corporation held a variable interest at September 30, 2013 and December 31, 2012.

Home Equity Loan VIEs
 
 
 
 
 
September 30, 2013
 
December 31, 2012
(Dollars in millions)
Consolidated
VIEs
 
Unconsolidated
VIEs
 
Total
 
Consolidated
VIEs
 
Unconsolidated
VIEs
 
Total
Maximum loss exposure (1)
$
1,317

 
$
6,440

 
$
7,757

 
$
2,004

 
$
6,707

 
$
8,711

On-balance sheet assets
 
 
 
 
 
 
 
 
 
 
 
Trading account assets
$
—

 
$
23

 
$
23

 
$
—

 
$
8

 
$
8

Debt securities carried at fair value
—

 
19

 
19

 
—

 
14

 
14

Loans and leases
1,406

 
—

 
1,406

 
2,197

 
—

 
2,197

Allowance for loan and lease losses
(89
)
 
—

 
(89
)
 
(193
)
 
—

 
(193
)
Total
$
1,317

 
$
42

 
$
1,359

 
$
2,004

 
$
22

 
$
2,026

On-balance sheet liabilities
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
$
1,503

 
$
—

 
$
1,503

 
$
2,331

 
$
—

 
$
2,331

All other liabilities
88

 
—

 
88

 
92

 
—

 
92

Total
$
1,591

 
$
—

 
$
1,591

 
$
2,423

 
$
—

 
$
2,423

Principal balance outstanding
$
1,406

 
$
6,829

 
$
8,235

 
$
2,197

 
$
12,644

 
$
14,841

(1) 
For unconsolidated VIEs, the maximum loss exposure includes outstanding trust certificates issued by trusts in rapid amortization, net of recorded reserves, and excludes the liability for representations and warranties obligations and corporate guarantees.

Included in the table above are consolidated and unconsolidated home equity loan securitizations, all of which have entered a rapid amortization period and for which the Corporation is obligated to provide subordinated funding. During this period, cash payments from borrowers are accumulated to repay outstanding debt securities and the Corporation continues to make advances to borrowers when they draw on their lines of credit. For additional information, see Note 7 – Securitizations and Other Variable Interest Entities to the Consolidated Financial Statements of the Corporation's 2012 Annual Report on Form 10-K. At September 30, 2013 and December 31, 2012, home equity loan securitizations in rapid amortization for which the Corporation has a subordinated funding obligation, including both consolidated and unconsolidated trusts, had $7.9 billion and $9.0 billion of trust certificates outstanding. This amount is significantly greater than the amount the Corporation expects to fund. The charges that will ultimately be recorded as a result of the rapid amortization events depend on the undrawn available credit on the home equity lines, which totaled $83 million and $196 million at September 30, 2013 and December 31, 2012, as well as performance of the loans, the amount of subsequent draws and the timing of related cash flows. At September 30, 2013 and December 31, 2012, the reserve for losses on expected future draw obligations on the home equity loan securitizations in rapid amortization for which the Corporation has a subordinated funding obligation was $15 million and $51 million.

The Corporation has consumer MSRs from the sale or securitization of home equity loans. The Corporation recorded $11 million and $37 million of servicing fee income related to home equity loan securitizations during the three and nine months ended September 30, 2013 compared to $14 million and $45 million for the same periods in 2012. The Corporation repurchased $81 million and $197 million of loans from home equity securitization trusts in order to perform modifications during the three and nine months ended September 30, 2013 compared to $22 million and $60 million for the same periods in 2012.

During the nine months ended September 30, 2013, the Corporation transferred servicing for consolidated home equity securitization trusts with total assets of $475 million and total liabilities of $616 million to a third party. As the Corporation no longer services the underlying loans, these trusts were deconsolidated, resulting in a gain of $141 million that was recorded in other income (loss) in the Consolidated Statement of Income.

Credit Card Securitizations

The Corporation securitizes originated and purchased credit card loans. The Corporation's continuing involvement with the securitization trusts includes servicing the receivables, retaining an undivided interest (seller's interest) in the receivables, and holding certain retained interests including senior and subordinate securities, discount receivables, subordinate interests in accrued interest and fees on the securitized receivables, and cash reserve accounts. The seller's interest in the trusts, which is pari passu to the investors' interest, and the discount receivables are classified in loans and leases.

The table below summarizes select information related to consolidated credit card securitization trusts in which the Corporation held a variable interest at September 30, 2013 and December 31, 2012.

Credit Card VIEs
 
 
 
(Dollars in millions)
September 30
2013
 
December 31
2012
Consolidated VIEs
 
 
 
Maximum loss exposure
$
44,412

 
$
42,487

On-balance sheet assets
 
 
 
Derivative assets
$
199

 
$
323

Loans and leases (1)
60,740

 
66,427

Allowance for loan and lease losses
(2,865
)
 
(3,445
)
All other assets (2)
1,971

 
1,567

Total
$
60,045

 
$
64,872

On-balance sheet liabilities
 
 
 
Long-term debt
$
15,569

 
$
22,291

All other liabilities
64

 
94

Total
$
15,633

 
$
22,385

(1) 
At September 30, 2013 and December 31, 2012, loans and leases included $36.0 billion and $33.5 billion of seller's interest and $24 million and $124 million of discount receivables.
(2) 
At September 30, 2013 and December 31, 2012, all other assets included restricted cash and short-term investment accounts and unbilled accrued interest and fees.

The Corporation holds subordinate securities with a notional principal amount of $8.7 billion and $10.1 billion at September 30, 2013 and December 31, 2012, and a stated interest rate of zero percent issued by certain credit card securitization trusts. In addition, during 2010 and 2009, the Corporation elected to designate a specified percentage of new receivables transferred to the trusts as "discount receivables" such that principal collections thereon are added to finance charges which increases the yield in the trust. Through the designation of newly transferred receivables as discount receivables, the Corporation subordinated a portion of its seller's interest to the investors' interest. These actions were taken to address the decline in the excess spread of the U.S. and U.K. credit card securitization trusts at that time.

During 2012, the Corporation transferred $553 million of credit card receivables to a third-party sponsored securitization vehicle. The Corporation no longer services the credit card receivables and does not consolidate the vehicle. At September 30, 2013 and December 31, 2012, the Corporation held a senior interest of $282 million and $309 million in these receivables, classified in loans and leases, that is not included in the table above.

Other Asset-backed Securitizations

Other asset-backed securitizations include resecuritization trusts, municipal bond trusts, and automobile and other securitization trusts. The table below summarizes select information related to other asset-backed securitizations in which the Corporation held a variable interest at September 30, 2013 and December 31, 2012.

Other Asset-backed VIEs
 
 
 
 
 
 
 
 
 
 
 
 
Resecuritization Trusts
 
Municipal Bond Trusts
 
Automobile and Other
Securitization Trusts
(Dollars in millions)
September 30
2013
 
December 31
2012
 
September 30
2013
 
December 31
2012
 
September 30
2013
 
December 31
2012
Unconsolidated VIEs
 
 
 
 
 
 
 
 
 
 
 
Maximum loss exposure
$
13,075

 
$
20,715

 
$
2,322

 
$
3,341

 
$
99

 
$
122

On-balance sheet assets
 
 
 
 
 
 
 
 
 
 
 
Senior securities held (1, 2):
 
 
 
 
 
 
 
 
 
 
 
Trading account assets
$
779

 
$
1,281

 
$
134

 
$
12

 
$
17

 
$
37

Debt securities carried at fair value
12,174

 
19,343

 
—

 
540

 
72

 
74

Subordinate securities held (1, 2):
 
 
 
 
 
 
 
 
 
 
 
Debt securities carried at fair value
67

 
75

 
—

 
—

 
—

 
—

Residual interests held (3)
55

 
16

 
—

 
—

 
—

 
—

All other assets
—

 
—

 
—

 
—

 
10

 
11

Total retained positions
$
13,075

 
$
20,715

 
$
134

 
$
552

 
$
99

 
$
122

Total assets of VIEs (4)
$
39,742

 
$
42,818

 
$
3,859

 
$
4,980

 
$
1,949

 
$
1,890

 
 
 
 
 
 
 
 
 
 
 
 
Consolidated VIEs
 
 
 
 
 
 
 
 
 
 
 
Maximum loss exposure
$
250

 
$
126

 
$
2,987

 
$
2,505

 
$
196

 
$
1,255

On-balance sheet assets
 
 
 
 
 
 
 
 
 
 
 
Trading account assets
$
1,169

 
$
220

 
$
2,987

 
$
2,505

 
$
—

 
$
—

Loans and leases
—

 
—

 
—

 
—

 
867

 
2,523

Allowance for loan and lease losses
—

 
—

 
—

 
—

 
(1
)
 
(2
)
All other assets
—

 
—

 
—

 
—

 
80

 
250

Total assets
$
1,169

 
$
220

 
$
2,987

 
$
2,505

 
$
946

 
$
2,771

On-balance sheet liabilities
 
 
 
 
 
 
 
 
 
 
 
Short-term borrowings
$
—

 
$
—

 
$
1,336

 
$
2,859

 
$
—

 
$
—

Long-term debt
919

 
94

 
—

 
—

 
749

 
1,513

All other liabilities
—

 
—

 
—

 
—

 
82

 
82

Total liabilities
$
919

 
$
94

 
$
1,336

 
$
2,859

 
$
831

 
$
1,595

(1) 
As a holder of these securities, the Corporation receives scheduled principal and interest payments. During the three and nine months ended September 30, 2013 and 2012, there were no OTTI losses recorded on those securities classified as AFS debt securities.
(2) 
The retained senior and subordinate securities were valued using quoted market prices or observable market inputs (Level 2 of the fair value hierarchy).
(3) 
The retained residual interests are carried at fair value which was derived using model valuations (Level 2 of the fair value hierarchy).
(4) 
Total assets include loans the Corporation transferred with which the Corporation has continuing involvement, which may include servicing the loan.

Resecuritization Trusts

The Corporation transfers existing securities, typically MBS, into resecuritization vehicles at the request of customers seeking securities with specific characteristics. The Corporation may also resecuritize securities within its investment portfolio for purposes of improving liquidity and capital, and managing credit or interest rate risk. 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 $6.6 billion and $18.2 billion of securities during the three and nine months ended September 30, 2013 compared to $12.2 billion and $36.5 billion for the same periods in 2012. All of the securities transferred into resecuritization vehicles during the three and nine months ended September 30, 2013 and 2012 were classified as trading account assets. As such, changes in fair value were recorded in trading account profits prior to the resecuritization and no gain or loss on sale was recorded.

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 basis to third-party investors. The Corporation may transfer assets into the trusts and may also serve as remarketing agent and/or liquidity provider for the trusts. The floating-rate investors have the right to tender the certificates at specified dates. Should the Corporation be unable to remarket the tendered certificates, it may be obligated to purchase them at par under standby liquidity facilities. The Corporation also provides credit enhancement to investors in certain municipal bond trusts whereby the Corporation guarantees the payment of interest and principal on floating-rate certificates issued by these trusts in the event of default by the issuer of the underlying municipal bond.

The Corporation's liquidity commitments to unconsolidated municipal bond trusts, including those for which the Corporation was transferor, totaled $2.2 billion and $2.8 billion at September 30, 2013 and December 31, 2012. The weighted-average remaining life of bonds held in the trusts at September 30, 2013 was 8.5 years. There were no material write-downs or downgrades of assets or issuers during the three and nine months ended September 30, 2013 and 2012.

Automobile and Other Securitization Trusts

The Corporation transfers automobile and other loans into securitization trusts, typically to improve liquidity or manage credit risk. At September 30, 2013 and December 31, 2012, the Corporation serviced assets or otherwise had continuing involvement with automobile and other securitization trusts with outstanding balances of $2.9 billion and $4.7 billion, including trusts collateralized by automobile loans of $1.2 billion and $3.5 billion, student loans of $773 million and $897 million, and other loans of $920 million and $290 million.

Collateralized Debt Obligation Vehicles

CDO vehicles hold diversified pools of fixed-income securities, typically corporate debt or ABS, which they fund by issuing multiple tranches of debt and equity securities. Synthetic CDOs enter into a portfolio of CDS to synthetically create exposure to fixed-income securities. CLOs, which are a subset of CDOs, hold pools of loans, typically corporate loans or commercial mortgages. CDOs are typically 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, including a CDS counterparty for synthetic CDOs. The Corporation has also entered into total return swaps with certain CDOs whereby the Corporation absorbs the economic returns generated by specified assets held by the CDO. The Corporation receives fees for structuring CDOs and providing liquidity support for super senior tranches of securities issued by certain CDOs. No third parties provide a significant amount of similar commitments to these CDOs.

The table below summarizes select information related to CDO vehicles in which the Corporation held a variable interest at September 30, 2013 and December 31, 2012.

CDO Vehicle VIEs
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2013
 
December 31, 2012
(Dollars in millions)
Consolidated
 
Unconsolidated
 
Total
 
Consolidated
 
Unconsolidated
 
Total
Maximum loss exposure
$
1,274

 
$
1,019

 
$
2,293

 
$
2,201

 
$
1,376

 
$
3,577

On-balance sheet assets
 
 
 
 
 
 
 
 
 
 
 
Trading account assets
$
1,280

 
$
290

 
$
1,570

 
$
2,191

 
$
258

 
$
2,449

Derivative assets
—

 
146

 
146

 
10

 
301

 
311

All other assets
—

 
57

 
57

 
—

 
76

 
76

Total
$
1,280

 
$
493

 
$
1,773

 
$
2,201

 
$
635

 
$
2,836

On-balance sheet liabilities
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
$
1,482

 
$
—

 
$
1,482

 
$
2,806

 
$
2

 
$
2,808

All other liabilities
—

 
7

 
7

 
—

 
9

 
9

Total
$
1,482

 
$
7

 
$
1,489

 
$
2,806

 
$
11

 
$
2,817

Total assets of VIEs
$
1,280

 
$
19,826

 
$
21,106

 
$
2,201

 
$
26,985

 
$
29,186



The Corporation's maximum loss exposure of $2.3 billion at September 30, 2013 included $1.3 billion of exposure to CDO financing facilities, $135 million of super senior CDO exposure and $884 million of other non-super senior exposure. This exposure is calculated on a gross basis and does not reflect any benefit from insurance purchased from third parties. The CDO financing facilities, which are consolidated, obtain funding from third parties for CDO positions which are principally classified in trading account assets. The CDO financing facilities' long-term debt at September 30, 2013 totaled $1.5 billion, all of which has recourse to the general credit of the Corporation. For unconsolidated CDO vehicles in the table above, the Corporation's maximum loss exposure is significantly less than the total assets of the VIEs because the Corporation typically has exposure to only a portion of the total assets.

At September 30, 2013, the Corporation had $1.5 billion of aggregate liquidity exposure to CDOs. This amount includes $87 million of commitments to CDOs to provide funding for super senior exposures and $1.4 billion notional amount of derivative contracts with unconsolidated VIEs, principally CDO vehicles, which hold non-super senior CDO debt securities or other debt securities on the Corporation's behalf. For additional information, see Note 11 – Commitments and Contingencies. The Corporation's liquidity exposure to CDOs at September 30, 2013 is included in the table above to the extent that the Corporation sponsored the CDO vehicle or the liquidity exposure is more than insignificant compared to total assets of the CDO vehicle. Liquidity exposure included in the table is reported net of previously recorded losses.

Customer Vehicles

Customer vehicles include credit-linked, equity-linked and commodity-linked note vehicles, repackaging vehicles, and asset acquisition vehicles, which are typically created on behalf of customers who wish to obtain market or credit exposure to a specific company, commodity price or financial instrument. The Corporation may transfer assets to and invest in securities issued by these vehicles. The Corporation typically enters into credit, equity, interest rate, commodity or foreign currency derivatives to synthetically create or alter the investment profile of the issued securities. The Corporation also had liquidity commitments, including written put options and collateral value guarantees, with certain unconsolidated vehicles of $667 million and $742 million at September 30, 2013 and December 31, 2012.

The table below summarizes select information related to customer vehicles in which the Corporation held a variable interest at September 30, 2013 and December 31, 2012.

Customer Vehicle VIEs
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2013
 
December 31, 2012
(Dollars in millions)
Consolidated
 
Unconsolidated
 
Total
 
Consolidated
 
Unconsolidated
 
Total
Maximum loss exposure
$
3,575

 
$
1,258

 
$
4,833

 
$
2,994

 
$
1,401

 
$
4,395

On-balance sheet assets
 
 
 
 
 
 
 
 
 
 
 
Trading account assets
$
2,283

 
$
87

 
$
2,370

 
$
2,882

 
$
98

 
$
2,980

Derivative assets
—

 
335

 
335

 
—

 
516

 
516

Loans and leases
846

 
—

 
846

 
523

 
—

 
523

Loans held-for-sale
1,038

 
—

 
1,038

 
950

 
—

 
950

All other assets
793

 
—

 
793

 
763

 
—

 
763

Total
$
4,960

 
$
422

 
$
5,382

 
$
5,118

 
$
614

 
$
5,732

On-balance sheet liabilities
 
 
 
 
 
 
 
 
 
 
 
Short-term borrowings
$
82

 
$
—

 
$
82

 
$
131

 
$
—

 
$
131

Long-term debt
2,413

 
—

 
2,413

 
3,179

 
—

 
3,179

All other liabilities
75

 
427

 
502

 
29

 
389

 
418

Total
$
2,570

 
$
427

 
$
2,997

 
$
3,339

 
$
389

 
$
3,728

Total assets of VIEs
$
4,960

 
$
4,229

 
$
9,189

 
$
5,118

 
$
4,055

 
$
9,173



The Corporation's maximum loss exposure from customer vehicles includes the notional amount of credit or equity 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 vehicles. The maximum loss exposure has not been reduced to reflect the benefit of offsetting swaps with the customers or collateral arrangements.

Other Variable Interest Entities

Other consolidated VIEs primarily include leveraged lease trusts and investment vehicles. Other unconsolidated VIEs primarily include real estate vehicles and investment vehicles.

The table below summarizes select information related to other VIEs in which the Corporation held a variable interest at September 30, 2013 and December 31, 2012.

Other VIEs
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2013
 
December 31, 2012
(Dollars in millions)
Consolidated
 
Unconsolidated
 
Total
 
Consolidated
 
Unconsolidated
 
Total
Maximum loss exposure
$
4,975

 
$
8,805

 
$
13,780

 
$
5,608

 
$
6,492

 
$
12,100

On-balance sheet assets
 
 
 
 
 
 
 
 
 
 
 
Trading account assets
$
97

 
$
—

 
$
97

 
$
108

 
$
—

 
$
108

Derivative assets
—

 
380

 
380

 
—

 
460

 
460

Debt securities carried at fair value
—

 
1,687

 
1,687

 
—

 
39

 
39

Loans and leases
3,965

 
250

 
4,215

 
4,561

 
67

 
4,628

Allowance for loan and lease losses
(4
)
 
—

 
(4
)
 
(14
)
 
—

 
(14
)
Loans held-for-sale
77

 
94

 
171

 
105

 
157

 
262

All other assets
988

 
6,079

 
7,067

 
1,001

 
5,768

 
6,769

Total
$
5,123

 
$
8,490

 
$
13,613

 
$
5,761

 
$
6,491

 
$
12,252

On-balance sheet liabilities
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
$
867

 
$
—

 
$
867

 
$
889

 
$
—

 
$
889

All other liabilities
73

 
2,137

 
2,210

 
63

 
1,692

 
1,755

Total
$
940

 
$
2,137

 
$
3,077

 
$
952

 
$
1,692

 
$
2,644

Total assets of VIEs
$
5,123

 
$
11,004

 
$
16,127

 
$
5,761

 
$
8,660

 
$
14,421



Investment Vehicles

The Corporation sponsors, invests in or provides financing, which may be in connection with the sale of assets, to a variety of investment vehicles 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 September 30, 2013 and December 31, 2012, the Corporation's consolidated investment vehicles had total assets of $1.2 billion and $1.3 billion. The Corporation also held investments in unconsolidated vehicles with total assets of $4.8 billion and $3.0 billion at September 30, 2013 and December 31, 2012. The Corporation's maximum loss exposure associated with both consolidated and unconsolidated investment vehicles totaled $3.8 billion and $2.1 billion at September 30, 2013 and December 31, 2012 comprised primarily of on-balance sheet assets less non-recourse liabilities.

During the three months ended September 30, 2013, the Corporation transferred servicing advance receivables to an independent third party in connection with the sale of MSRs. A portion of the receivables was transferred into a securitization trust. The Corporation retained a senior interest in such receivables with a maximum loss exposure of $2.0 billion and an outstanding balance of $1.7 billion at September 30, 2013, which was classified in debt securities carried at fair value.

Leveraged Lease Trusts

The Corporation's net investment in consolidated leveraged lease trusts totaled $3.9 billion and $4.4 billion at September 30, 2013 and December 31, 2012. 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 Corporation has no liquidity exposure to these leveraged lease trusts.

Real Estate Vehicles

The Corporation held investments in unconsolidated real estate vehicles of $5.8 billion and $5.4 billion at September 30, 2013 and December 31, 2012, which primarily consisted of investments in unconsolidated limited partnerships that finance the construction and rehabilitation of affordable rental housing and commercial real estate. An unrelated third party is typically the general partner and has control over the significant activities of the partnership. The Corporation earns a return primarily through the receipt of tax credits allocated to the real estate projects. The Corporation's risk of loss is mitigated by policies requiring that the project qualify for the expected tax credits prior to making its investment. The Corporation may from time to time be asked to invest additional amounts to support a troubled project. Such additional investments have not been and are not expected to be significant.

Other Asset-backed Financing Arrangements

The Corporation transferred pools of securities to certain independent third parties and provided financing for up to 75 percent of the purchase price under asset-backed financing arrangements. At September 30, 2013 and December 31, 2012, the Corporation's maximum loss exposure under these financing arrangements was $1.2 billion and $2.5 billion, substantially all of which was classified in loans and leases. All principal and interest payments have been received when due in accordance with their contractual terms. These arrangements are not included in the Other VIEs table because the purchasers are not VIEs.