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Loan Sale and Servicing Activities and Variable Interest Entities
 9 Months Ended
Sep. 30, 2020
Loan Sale and Servicing Activities and Variable Interest Entities [Abstract]  
Loan Sale and Servicing Activities and Variable Interest Entities LOAN SALE AND SERVICING ACTIVITIES AND VARIABLE INTEREST ENTITIES

Loan Sale and Servicing Activities

As more fully described in Note 2 Loan Sale and Servicing Activities and Variable Interest Entities in our 2019 Form 10-K, we have transferred residential and commercial mortgage loans in securitization or sales transactions in which we have continuing involvement. Our continuing involvement generally consists of servicing, repurchasing previously transferred loans under certain conditions and loss share arrangements, and, in limited circumstances, holding of mortgage-backed securities issued by the securitization special purpose entities (SPEs).

We earn servicing and other ancillary fees for our role as servicer and, depending on the contractual terms of the servicing arrangement, we can be terminated as servicer with or without cause. At the consummation date of each type of loan transfer where we retain the servicing, we recognize a servicing right at fair value. See Note 9 Commitments and Note 12 Fair Value for information on our servicing rights, including the carrying value of servicing assets.
The following table provides cash flows associated with our loan sale and servicing activities:
Table 54: Cash Flows Associated with Loan Sale and Servicing Activities
In millions
Residential
Mortgages

 
Commercial
Mortgages (a)
 
 
Cash Flows - Three months ended September 30, 2020
 
 
 
 
 
Sales of loans (b)
$
1,799

 
 
$
839

 
Repurchases of previously transferred loans (c)
$
352

 
 
$
107

 
Servicing fees (d)
$
85

 
 
$
33

 
Servicing advances recovered/(funded), net
$
(15
)
 
 
$
(78
)
 
Cash flows on mortgage-backed securities held (e)
$
2,829

 
 
$
14

 
Cash Flows - Three months ended September 30, 2019
 
 
 
 
 
Sales of loans (b)
$
1,296

 
 
$
1,122

 
Repurchases of previously transferred loans (c)
$
81

 
 


 
Servicing fees (d)
$
90

 
 
$
34

 
Servicing advances recovered/(funded), net
$
5

 
 
$
45

 
Cash flows on mortgage-backed securities held (e)
$
1,394

 
 
$
14

 
Cash Flows - Nine months ended September 30, 2020
 
 
 
 
 
Sales of loans (b)
$
5,328

 
 
$
2,666

 
Repurchases of previously transferred loans (c)
$
547

 
 
$
132

 
Servicing fees (d)
$
251

 
 
$
97

 
Servicing advances recovered/(funded), net
$
4

 
 
$
(206
)
 
Cash flows on mortgage-backed securities held (e)
$
6,374

 
 
$
65

 
Cash Flows - Nine months ended September 30, 2019
 
 
 
 
 
Sales of loans (b)
$
2,902

 
 
$
2,212

 
Repurchases of previously transferred loans (c)
$
235

 
 
$
4

 
Servicing fees (d)
$
264

 
 
$
97

 
Servicing advances recovered/(funded), net
$
33

 
 
$
61

 
Cash flows on mortgage-backed securities held (e)
$
2,653

 
 
$
43

 
(a)
Represents cash flow information associated with both commercial mortgage loan transfers and servicing activities.
(b)
Gains/losses recognized on sales of loans were insignificant for the periods presented.
(c)
Includes both residential and commercial mortgage government insured or guaranteed loans eligible for repurchase through the exercise of our removal of account provision option, as well as residential mortgage loans repurchased due to alleged breaches of origination covenants or representations and warranties made to purchasers.
(d)
Includes contractually specified servicing fees, late charges and ancillary fees.
(e)
Represents cash flows on securities where we transferred to and/or service loans for a securitization SPE and we hold securities issued by that SPE. The carrying values of such securities held were $19.5 billion, $17.8 billion, and $17.7 billion in residential mortgage-backed securities and $.8 billion, $.6 billion, and $.6 billion in commercial mortgage-backed securities at September 30, 2020, December 31, 2019 and September 30, 2019, respectively.
Table 55 presents information about the principal balances of transferred loans that we service and are not recorded on our Consolidated Balance Sheet. We would only experience a loss on these transferred loans if we were required to repurchase a loan, where the repurchase price exceeded the loan's fair value, due to a breach in representations and warranties or a loss sharing arrangement associated with our continuing involvement with these loans. The estimate of losses related to breaches in representations and warranties was insignificant at September 30, 2020.
Table 55: Principal Balance, Delinquent Loans and Net Charge-offs Related to Serviced Loans For Others
In millions
Residential Mortgages

 
 
Commercial Mortgages (a)

 
September 30, 2020
 
 
 
 
 
Total principal balance
$
45,795

 
 
$
41,379

 
Delinquent loans (b)
$
460

 
 
$
311

 
December 31, 2019
 
 
 
 
 
Total principal balance
$
49,323

 
 
$
42,414

 
Delinquent loans (b)
$
492

 
 
$
64

 
Three months ended September 30, 2020
 
 
 
 
 
Net charge-offs (c)
$
4

 
 
$
4

 
Three months ended September 30, 2019
 
 
 
 
 
Net charge-offs (c)
$
8

 
 
$
52

 
Nine months ended September 30, 2020
 
 
 
 
 
Net charge-offs (c)
$
14

 
 
$
103

 
Nine months ended September 30, 2019
 
 
 
 
 
Net charge-offs (c)
$
32

 
 
$
348

 
(a)
Represents information at the securitization level in which we have sold loans and we are the servicer for the securitization.
(b)
Serviced delinquent loans are 90 days or more past due or are in process of foreclosure.
(c)
Net charge-offs for Residential mortgages represent credit losses less recoveries distributed and as reported to investors during the period. Net charge-offs for Commercial mortgages represent credit losses less recoveries distributed and as reported by the trustee for commercial mortgage-backed securitizations. Realized losses for Agency securitizations are not reflected as we do not manage the underlying real estate upon foreclosure and, as such, do not have access to loss information.

Variable Interest Entities (VIEs)

As discussed in Note 2 Loan Sale and Servicing Activities and Variable Interest Entities in our 2019 Form 10-K, we are involved with various entities in the normal course of business that are deemed to be VIEs.

The following table provides a summary of non-consolidated VIEs with which we have significant continuing involvement but are not the primary beneficiary. We have excluded certain transactions with non-consolidated VIEs from the balances presented in Table 56 where we have determined that our continuing involvement is not significant. We do not consider our continuing involvement to be significant when it relates to a VIE where we only invest in securities issued by the VIE and were not involved in the design of the VIE or where no transfers have occurred between us and the VIE. In addition, where we only have lending arrangements in the normal course of business with entities that could be VIEs, we have excluded these transactions with non-consolidated entities from the balances presented in Table 56. These loans are included as part of the asset quality disclosures that we make in Note 4 Loans and Related Allowance for Credit Losses.
Table 56: Non-Consolidated VIEs
In millions
PNC Risk of Loss (a)

 
 
Carrying Value of Assets
Owned by PNC

 
 
 
Carrying Value of Liabilities
Owned by PNC

 
September 30, 2020
 
 
 
 
 
 
 
 
 
Mortgage-backed securitizations (b)
$
21,109

 
 
$
21,109

(c) 
 
 
$
1

 
Tax credit investments and other
3,005

 
 
2,886

(d) 
 
 
$
920

(e) 
Total
$
24,114

 
 
$
23,995

 
 
 
$
921

 
December 31, 2019
 
 
 
 
 
 
 
 
 
Mortgage-backed securitizations (b)
$
19,287

 
 
$
19,287

(c) 
 
 
 
 
Tax credit investments and other
3,131

 
 
3,028

(d) 
 
 
$
1,101

(e) 
Total
$
22,418

 
 
$
22,315

 
 
 
$
1,101

 
(a)
Represents loans, investments and other assets related to non-consolidated VIEs, net of collateral (if applicable). The risk of loss excludes any potential tax recapture associated with tax credit investments.
(b)
Amounts reflect involvement with securitization SPEs where we transferred to and/or service loans for an SPE and we hold securities issued by that SPE. Values disclosed in the PNC Risk of Loss column represent our maximum exposure to loss for those securities’ holdings.
(c)
Included in Investment securities, Mortgage servicing rights and Other assets on our Consolidated Balance Sheet.
(d)
Included in Investment securities, Loans, Equity investments and Other assets on our Consolidated Balance Sheet.
(e)
Included in Deposits and Other liabilities on our Consolidated Balance Sheet.

We make certain equity investments in various tax credit limited partnerships or limited liability companies (LLCs). The purpose of these investments is to achieve a satisfactory return on capital and to assist us in achieving goals associated with the Community Reinvestment Act. Within Income taxes, during the nine months ended September 30, 2020, we recognized $140 million of
amortization, $144 million of tax credits and $32 million of other tax benefits associated with qualified investments in low income housing tax credits. The amounts for the third quarter of 2020 were $44 million, $46 million and $10 million, respectively.