Loan Sale and Servicing Activities and Variable Interest Entities

3 Months Ended

Mar. 31, 2023

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 5 Loan Sale and Servicing Activities and Variable Interest Entities in our 2022 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 in the FNMA, FHLMC and GNMA securitizations, Non-agency securitizations and loan sale transactions 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 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 8 Commitments and Note 11 Fair Value for information on our servicing rights, including the carrying value of servicing assets.

The following table provides our loan sale and servicing activities:

Table 50: Loan Sale and Servicing Activities

In millions	Residential Mortgages		Commercial Mortgages (a)
Cash Flows - Three months ended March 31, 2023
Sales of loans and related securitization activity (b)	$	516		$	954
Repurchases of previously transferred loans (c)	$	29		$	9
Servicing fees (d)	$	128		$	46
Servicing advances recovered/(funded), net	$	28		$	(49)
Cash flows on mortgage-backed securities held (e)	$	603		$	12
Cash Flows - Three months ended March 31, 2022
Sales of loans and related securitization activity (b)	$	1,894		$	910
Repurchases of previously transferred loans (c)	$	48		$	27
Servicing fees (d)	$	93		$	42
Servicing advances recovered/(funded), net	$	32		$	21
Cash flows on mortgage-backed securities held (e)	$	1,296		$	14

(a)Represents both commercial mortgage loan transfer 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 ROAP 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 $21.6 billion, $21.4 billion and $18.9 billion in residential mortgage-backed securities and $0.7 billion, $0.7 billion and $0.8 billion in commercial mortgage-backed securities at March 31, 2023, December 31, 2022 and March 31, 2022, respectively.

Table 51 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 March 31, 2023.

Table 51: Principal Balance, Delinquent Loans and Net Charge-offs Related to Serviced Loans For Others

In millions	Residential Mortgages		Commercial Mortgages (a)
March 31, 2023
Total principal balance	$	40,451	$	58,186
Delinquent loans (b)	$	322
December 31, 2022
Total principal balance	$	41,031	$	57,974
Delinquent loans (b)	$	346
Three months ended March 31, 2023
Net charge-offs (c)	$	2	$	4
Three months ended March 31, 2022
Net charge-offs (c)	$	1

(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 5 Loan Sale and Servicing Activities and Variable Interest Entities included in our 2022 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 52 where we have determined that our continuing involvement is insignificant. 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 52. These loans are included as part of the credit quality disclosures that we make in Note 3 Loans and Related Allowance for Credit Losses.

Table 52: Non-Consolidated VIEs

In millions	PNC Risk of Loss (a)		Carrying Value of Assets Owned by PNC			Carrying Value of Liabilities Owned by PNC
March 31, 2023
Mortgage-backed securitizations (b)	$	22,925	$	22,928	(c)	$	1
Tax credit investments and other	4,338		4,171		(d)	2,032		(e)
Total	$	27,263	$	27,099		$	2,033
December 31, 2022
Mortgage-backed securitizations (b)	$	22,666	$	22,670	(c)	$	1
Tax credit investments and other	4,411		4,240		(d)	2,063		(e)
Total	$	27,077	$	26,910		$	2,064

(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 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 both the three months ended March 31, 2023 and 2022, we recognized less than $0.1 billion of amortization, tax credits and other tax benefits associated with qualified investments in LIHTCs.