Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2015

The following table summarizes the carrying values and estimated fair value of our financial instruments at March 31, 2015 and December 31, 2014.



	March 31, 2015
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets:
Cash	$	147	$	147	$	147	$	—	$	—
Interest bearing deposits with banks	2,001		2,001		2,001		—		—
Securities purchased under agreements to resell	3,327		3,327		—		3,327		—
Real estate secured receivables⁽¹⁾:
First lien	18,159		16,868		—		—		16,868
Second lien	2,236		1,322		—		—		1,322
Total real estate secured receivables	20,395		18,190		—		—		18,190
Real estate secured receivables held for sale	1,097		1,171		—		352		819
Due from affiliates	239		239		—		239		—
Financial liabilities:
Due to affiliates carried at fair value	513		513		—		513		—
Due to affiliates not carried at fair value	6,432		6,767		—		6,767		—
Long-term debt carried at fair value	6,396		6,396		—		6,396		—
Long-term debt not carried at fair value	9,011		9,556		—		8,512		1,044



	December 31, 2014
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets:
Cash	$	157	$	157	$	157	$	—	$	—
Interest bearing deposits with banks	2,000		2,000		2,000		—		—
Securities purchased under agreements to resell	3,863		3,863		—		3,863		—
Real estate secured receivables⁽¹⁾:
First lien	18,943		16,878		—		—		16,878
Second lien	2,299		1,246		—		—		1,246
Total real estate secured receivables	21,242		18,124		—		—		18,124
Real estate secured receivables held for sale	860		937		—		—		937
Due from affiliates	102		102		—		102		—
Financial liabilities:
Due to affiliates carried at fair value	512		512		—		512		—
Due to affiliates not carried at fair value	6,433		6,723		—		6,723		—
Long-term debt carried at fair value	6,762		6,762		—		6,762		—
Long-term debt not carried at fair value	9,665		10,233		—		8,779		1,454

⁽¹⁾

The receivable balances included in this table reflects the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies and includes certain basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. However, these basis adjustments on the loans are excluded in other presentations of dollars of two-months-and-over contractual delinquency, nonaccrual receivable and nonperforming receivable account balances.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following table presents information about our assets and liabilities measured at fair value on a recurring basis as of March 31, 2015 and December 31, 2014, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Netting⁽¹⁾			Total of Assets (Liabilities) Measured at Fair Value
	(in millions)
March 31, 2015:
Derivative financial assets:
Interest rate swaps	$	—	$	106		$	—	$	—		$	106
Currency swaps	—		127			—		—			127
Derivative netting	—		—			—		(233		)	(233		)
Total derivative financial assets	—		233			—		(233		)	—
Total assets	$	—	$	233		$	—	$	(233	)	$	—
Due to affiliates carried at fair value	$	—	$	(513	)	$	—	$	—		$	(513	)
Long-term debt carried at fair value	—		(6,396		)	—		—			(6,396		)
Derivative related liabilities:
Interest rate swaps	—		(511		)	—		—			(511		)
Currency swaps	—		(551		)	—		—			(551		)
Derivative netting	—		—			—		961			961
Total derivative related liabilities	—		(1,062		)	—		961			(101		)
Total liabilities	$	—	$	(7,971	)	$	—	$	961		$	(7,010	)
December 31, 2014:
Derivative financial assets:
Interest rate swaps	$	—	$	144		$	—	$	—		$	144
Currency swaps	—		147			—		—			147
Derivative netting	—		—			—		(291		)	(291		)
Total derivative financial assets	—		291			—		(291		)	—
Total assets	$	—	$	291		$	—	$	(291	)	$	—
Due to affiliates carried at fair value	$	—	$	(512	)	$	—	$	—		$	(512	)
Long-term debt carried at fair value	—		(6,762		)	—		—			(6,762		)
Derivative related liabilities:
Interest rate swaps	—		(453		)	—		—			(453		)
Currency swaps	—		(133		)	—		—			(133		)
Derivative netting	—		—			—		504			504
Total derivative related liabilities	—		(586		)	—		504			(82		)
Total liabilities	$	—	$	(7,860	)	$	—	$	504		$	(7,356	)


⁽¹⁾	Represents counterparty and swap collateral netting which allow the offsetting of amounts relating to certain contracts when certain conditions are met.

Assets and Liabilities Recorded at Fair Value on a Non-recurring Basis

The following table presents information about our assets and liabilities measured at fair value on a non-recurring basis as of March 31, 2015 and 2014, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.



	Non-Recurring Fair Value Measurements as of March 31, 2015								Total Gains (Losses) for the Three Months Ended March 31, 2015
	Level 1		Level 2		Level 3		Total
	(in millions)
Real estate secured receivables held for sale	$	—	$	333	$	764	$	1,097	$	(17	)
Receivables held for investment carried at the lower of amortized cost or fair value of the collateral less cost to sell⁽¹⁾	—		529		—		529		(72		)
Real estate owned⁽²⁾	—		186		—		186		(4		)
Total assets at fair value on a non-recurring basis	$	—	$	1,048	$	764	$	1,812	$	(93	)



	Non-Recurring Fair Value Measurements as of March 31, 2014								Total Gains (Losses) for the Three Months Ended March 31, 2014
	Level 1		Level 2		Level 3		Total
	(in millions)
Real estate secured receivables held for sale	$	—	$	902	$	1,518	$	2,420	$	111
Receivables held for investment carried at the lower of amortized cost or fair value of the collateral less cost to sell⁽¹⁾	—		927		—		927		(163		)
Real estate owned⁽²⁾	—		288		—		288		(20		)
Total assets at fair value on a non-recurring basis	$	—	$	2,117	$	1,518	$	3,635	$	(72	)


⁽¹⁾	Total gains (losses) for the three months ended March 31, 2015 and 2014 include amounts recorded on receivables that were subsequently transferred to held for sale.


⁽²⁾	Real estate owned is required to be reported on the balance sheet net of transactions costs. The real estate owned amounts in the table above reflect the fair value of the underlying asset unadjusted for transaction costs.

Fair Value Inputs, Assets, Quantitative Information

The following table presents quantitative information about non-recurring fair value measurements of assets and liabilities classified as Level 3 in the fair value hierarchy as of March 31, 2015 and December 31, 2014:



	Fair Value						Range of Inputs
Financial Instrument Type	Mar. 31, 2015		Dec. 31, 2014		Valuation Technique	Significant Unobservable Inputs	March 31, 2015				December 31, 2014
	(in millions)
Receivables held for sale carried at the lower of amortized cost or fair value:
Real estate secured	$	764	$	860	Third party appraisal valuation based on	Collateral loss severity rates⁽¹⁾	0	%	-	81%	0	%	-	79	%
					estimated loss severities, including collateral values, cash flows and	Expenses incurred through collateral disposition	5	%	-	10%	5	%	-	10	%
					market discount rate	Market discount rate	4	%	-	8%	4	%	-	8%

⁽¹⁾

The majority of the real estate secured receivables held for sale consider collateral value, among other items, in determining fair value. Collateral values are based on the most recently available broker's price opinion. The weighted average collateral loss severity based solely on consideration of collateral value was 18 percent and 18 percent at March 31, 2015 and December 31, 2014, respectively. In the current market conditions, investors also take into consideration the fact that the most recently available broker's price opinion may not capture all of the home price appreciation due to the timing of the receipt of the opinion.

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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