Note 7: Securitizations and Variable Interest Entities

Involvement with SPEs

In the normal course of business, we enter into various types of on- and off-balance sheet transactions with SPEs, which are corporations, trusts, limited liability companies or partnerships that are established for a limited purpose. Generally, SPEs are formed in connection with securitization transactions and are considered variable interest entities (VIEs). For further description of our involvement with SPEs, see Note 8 (Securitizations and Variable Interest Entities) to Financial Statements in our 2016 Form 10-K.

We have segregated our involvement with VIEs between those VIEs which we consolidate, those which we do not consolidate and those for which we account for the transfers of financial assets as secured borrowings. Secured borrowings are transactions involving transfers of our financial assets to third parties that are accounted for as financings with the assets pledged as collateral. Accordingly, the transferred assets remain recognized on our balance sheet. Subsequent tables within this Note further segregate these transactions by structure type.

Table 7.1 provides the classifications of assets and liabilities in our balance sheet for our transactions with VIEs.

Table 7.1: Balance Sheet Transactions with VIEs



(in millions)	VIEs that we do not consolidate		VIEs that we consolidate	Transfers that we account for as secured borrowings		Total
September 30, 2017
Cash	$	—	115		—	115
Federal funds sold, securities purchased under resale agreements and other short-term investments	—		402		—	402
Trading assets	1,150		130		201	1,481
Investment securities (1)	4,944		—		364	5,308
Loans	4,491		11,905		508	16,904
Mortgage servicing rights	13,340		—		—	13,340
Derivative assets	80		—		—	80
Other assets	10,355		352		7	10,714
Total assets	34,360		12,904		1,080	48,344
Short-term borrowings	—		—		523	523
Derivative liabilities	101		26	(2)	—	127
Accrued expenses and other liabilities	240		141	(2)	32	413
Long-term debt	3,103		2,103	(2)	489	5,695
Total liabilities	3,444		2,270		1,044	6,758
Noncontrolling interests	—		119		—	119
Net assets	$	30,916	10,515		36	41,467
December 31, 2016
Cash	$	—	168		—	168
Federal funds sold, securities purchased under resale agreements and other short-term investments	—		74		—	74
Trading assets	2,034		130		201	2,365
Investment securities (1)	8,530		—		786	9,316
Loans	6,698		12,589		138	19,425
Mortgage servicing rights	13,386		—		—	13,386
Derivative assets	91		1		—	92
Other assets	10,281		452		11	10,744
Total assets	41,020		13,414		1,136	55,570
Short-term borrowings	—		—		905	905
Derivative liabilities	59		33	(2)	—	92
Accrued expenses and other liabilities	306		107	(2)	2	415
Long-term debt	3,598		3,694	(2)	136	7,428
Total liabilities	3,963		3,834		1,043	8,840
Noncontrolling interests	—		138		—	138
Net assets	$	37,057	9,442		93	46,592


(1)	Excludes certain debt securities related to loans serviced for the Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) and GNMA.


(2)	There were no VIE liabilities with recourse to the general credit of Wells Fargo for the periods presented.

Transactions with Unconsolidated VIEs

Our transactions with unconsolidated VIEs include securitizations of residential mortgage loans, CRE loans, student loans, automobile loans and leases, certain dealer floorplan loans; investment and financing activities involving collateralized debt obligations (CDOs) backed by asset-backed and CRE securities, tax credit structures, collateralized loan obligations (CLOs) backed by corporate loans, and other types of structured financing. We have various forms of involvement with VIEs, including servicing, holding senior or subordinated interests, entering into liquidity arrangements, credit default swaps and other derivative contracts. Involvements with these unconsolidated VIEs are recorded on our balance sheet in trading assets, investment securities, loans, MSRs, derivative assets and liabilities, other assets, other liabilities, and long-term debt, as appropriate.

Table 7.2 provides a summary of unconsolidated VIEs with which we have significant continuing involvement, but we are not the primary beneficiary. We do not consider our continuing involvement in an unconsolidated VIE to be significant when it relates to third-party sponsored VIEs for which we were not the transferor (unless we are servicer and have other significant forms of involvement) or if we were the sponsor only or sponsor and servicer but do not have any other forms of significant involvement.

Significant continuing involvement includes transactions where we were the sponsor or transferor and have other significant forms of involvement. Sponsorship includes transactions with unconsolidated VIEs where we solely or materially participated in the initial design or structuring of the entity or marketing of the transaction to investors. When we transfer assets to a VIE and account for the transfer as a sale, we are considered the transferor. We consider investments in securities (other than those held temporarily in trading), loans, guarantees, liquidity agreements, written options and servicing of collateral to be other forms of involvement that may be significant. We have excluded certain transactions with unconsolidated VIEs from the balances presented in the following table where we have determined that our continuing involvement is not significant due to the temporary nature and size of our variable interests, because we were not the transferor or because we were not involved in the design of the unconsolidated VIEs. We also exclude from the table secured borrowing transactions with unconsolidated VIEs (for information on these transactions, see the Transactions with Consolidated VIEs and Secured Borrowings section in this Note).

Table 7.2: Unconsolidated VIEs



			Carrying value – asset (liability)
(in millions)	Total VIE assets		Debt and equity interests (1)		Servicing assets	Derivatives		Other commitments and guarantees		Net assets
September 30, 2017
Residential mortgage loan securitizations:
Conforming (2)	$	1,172,135	2,056		12,387	—		(188	)	14,255
Other/nonconforming	15,226		774		85	—		—		859
Commercial mortgage securitizations	142,525		2,535		868	70		(33	)	3,440
Collateralized debt obligations:
Debt securities	1,074		—		—	5		(20	)	(15	)
Loans (3)	1,494		1,457		—	—		—		1,457
Asset-based finance structures	3,569		2,666		—	—		—		2,666
Tax credit structures	29,295		10,820		—	—		(3,103	)	7,717
Collateralized loan obligations	18		4		—	—		—		4
Investment funds	216		51		—	—		—		51
Other (4)	2,521		577		—	(95	)	—		482
Total	$	1,368,073	20,940		13,340	(20	)	(3,344	)	30,916
			Maximum exposure to loss
			Debt and equity interests (1)		Servicing assets	Derivatives		Other commitments and guarantees		Total exposure
Residential mortgage loan securitizations:
Conforming			$	2,056	12,387	—		976		15,419
Other/nonconforming			774		85	—		—		859
Commercial mortgage securitizations			2,535		868	73		9,901		13,377
Collateralized debt obligations:
Debt securities			—		—	5		20		25
Loans (3)			1,457		—	—		—		1,457
Asset-based finance structures			2,666		—	—		71		2,737
Tax credit structures			10,820		—	—		947		11,767
Collateralized loan obligations			4		—	—		—		4
Investment funds			51		—	—		—		51
Other (4)			577		—	120		157		854
Total			$	20,940	13,340	198		12,072		46,550

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			Carrying value – asset (liability)
(in millions)	Total VIE assets		Debt and equity interests (1)		Servicing assets	Derivatives		Other commitments and guarantees		Net assets
December 31, 2016
Residential mortgage loan securitizations:
Conforming (2)	$	1,166,296	3,026		12,434	—		(232	)	15,228
Other/nonconforming	18,805		873		109	—		(2	)	980
Commercial mortgage securitizations	166,596		4,258		843	87		(35	)	5,153
Collateralized debt obligations:
Debt securities	1,472		—		—	—		(25	)	(25	)
Loans (3)	1,545		1,507		—	—		—		1,507
Asset-based finance structures	9,152		6,522		—	—		—		6,522
Tax credit structures	29,713		10,669		—	—		(3,609	)	7,060
Collateralized loan obligations	78		10		—	—		—		10
Investment funds	214		48		—	—		—		48
Other (4)	1,733		630		—	(56	)	—		574
Total	$	1,395,604	27,543		13,386	31		(3,903	)	37,057
			Maximum exposure to loss
			Debt and equity interests (1)		Servicing assets	Derivatives		Other commitments and guarantees		Total exposure
Residential mortgage loan securitizations:
Conforming			$	3,026	12,434	—		979		16,439
Other/nonconforming			873		109	—		2		984
Commercial mortgage securitizations			4,258		843	94		9,566		14,761
Collateralized debt obligations:
Debt securities			—		—	—		25		25
Loans (3)			1,507		—	—		—		1,507
Asset-based finance structures			6,522		—	—		72		6,594
Tax credit structures			10,669		—	—		1,104		11,773
Collateralized loan obligations			10		—	—		—		10
Investment funds			48		—	—		—		48
Other (4)			630		—	93		—		723
Total			$	27,543	13,386	187		11,748		52,864


(1)	Includes total equity interests of $10.4 billion and $10.3 billion at September 30, 2017, and December 31, 2016, respectively. Also includes debt interests in the form of both loans and securities. Excludes certain debt securities held related to loans serviced for FNMA, FHLMC and GNMA.

(2)

Excludes assets and related liabilities with a recorded carrying value on our balance sheet of $1.3 billion and $1.2 billion at September 30, 2017, and December 31, 2016, respectively, for certain delinquent loans that are eligible for repurchase from GNMA loan securitizations. The recorded carrying value represents the amount that would be payable if the Company was to exercise the repurchase option. The carrying amounts are excluded from the table because the loans eligible for repurchase do not represent interests in the VIEs.

(3)

Represents senior loans to trusts that are collateralized by asset-backed securities. The trusts invest in senior tranches from a diversified pool of U.S. asset securitizations, of which all are current and 100% were rated as investment grade by the primary rating agencies at both September 30, 2017, and December 31, 2016. These senior loans are accounted for at amortized cost and are subject to the Company’s allowance and credit charge-off policies.


(4)	Includes structured financing and credit-linked note structures. Also contains investments in auction rate securities (ARS) issued by VIEs that we do not sponsor and, accordingly, are unable to obtain the total assets of the entity.

In Table 7.2, “Total VIE assets” represents the remaining principal balance of assets held by unconsolidated VIEs using the most current information available. For VIEs that obtain exposure to assets synthetically through derivative instruments, the remaining notional amount of the derivative is included in the asset balance. “Carrying value” is the amount in our consolidated balance sheet related to our involvement with the unconsolidated VIEs. “Maximum exposure to loss” from our involvement with off-balance sheet entities, which is a required disclosure under GAAP, is determined as the carrying value of our involvement with off-balance sheet (unconsolidated) VIEs plus the remaining undrawn liquidity and lending commitments, the notional amount of net written derivative contracts, and generally the notional amount of, or stressed loss estimate for, other commitments and guarantees. It represents estimated loss that would be incurred under severe, hypothetical circumstances, for which we believe the possibility is extremely remote, such as where the value of our interests and any associated collateral declines to zero, without any consideration of recovery or offset from any economic hedges. Accordingly, this required disclosure is not an indication of expected loss.

For complete descriptions of our types of transactions with unconsolidated VIEs with which we have a significant continuing involvement, but we are not the primary beneficiary, see Note 8 (Securitizations and Variable Interest Entities) to Financial Statements in our 2016 Form 10-K.

INVESTMENT FUNDS Subsequent to adopting ASU 2015-02 (Amendments to the Consolidation Analysis) in first quarter 2016, we do not consolidate these investment funds because we do not hold variable interests that are considered significant to the funds.

We voluntarily waived a portion of our management fees for certain money market funds that are exempt from the consolidation analysis to ensure the funds maintained a minimum level of daily net investment income. The amount of fees waived in the third quarter and first nine months of 2017 was $12 million and $39 million, respectively, compared with $28 million and $84 million, respectively, in the same periods of 2016.

OTHER TRANSACTIONS WITH VIEs Other VIEs include certain entities that issue auction rate securities (ARS) which are debt instruments with long-term maturities, that re-price more frequently, and preferred equities with no maturity. At September 30, 2017, we held $400 million of ARS issued by VIEs compared with $453 million at December 31, 2016. We acquired the ARS pursuant to agreements entered into in 2008 and 2009.

We do not consolidate the VIEs that issued the ARS because we do not have power over the activities of the VIEs.

TRUST PREFERRED SECURITIES VIEs that we wholly own issue debt securities or preferred equity to third party investors. All of the proceeds of the issuance are invested in debt securities or preferred equity that we issue to the VIEs. The VIEs’ operations and cash flows relate only to the issuance, administration and repayment of the securities held by third parties. We do not consolidate these VIEs because the sole assets of the VIEs are receivables from us, even though we own all of the voting equity shares of the VIEs, have fully guaranteed the obligations of the VIEs and may have the right to redeem the third party securities under certain circumstances. In our consolidated balance sheet at September 30, 2017, and December 31, 2016, we reported the debt securities issued to the VIEs as long-term junior subordinated debt with a carrying value of $2.0 billion and $2.1 billion, respectively, and the preferred equity securities issued to the VIEs as preferred stock with a carrying value of $2.5 billion at both dates. These amounts are in addition to the involvements in these VIEs included in the preceding table.

In the first nine months of 2017, we redeemed $150 million of trust preferred securities which were partially included in Tier 2 capital (50% credit in 2017) in the transitional framework and were not included under the fully-phased framework under the Basel III standards.

Loan Sales and Securitization Activity

We periodically transfer consumer and CRE loans and other types of financial assets in securitization and whole loan sale transactions. We typically retain the servicing rights from these sales and may continue to hold other beneficial interests in the transferred financial assets. We may also provide liquidity to investors in the beneficial interests and credit enhancements in the form of standby letters of credit. Through these transfers we may be exposed to liability under limited amounts of recourse as well as standard representations and warranties we make to purchasers and issuers. Table 7.3 presents the cash flows for our transfers accounted for as sales.

Table 7.3: Cash Flows From Sales and Securitization Activity



	2017				2016
(in millions)	Mortgage loans			Other financial assets	Mortgage loans		Other financial assets
Quarter ended September 30,
Proceeds from securitizations and whole loan sales	$	61,756		—	66,830		53
Fees from servicing rights retained	826			—	891		—
Cash flows from other interests held (1)	408			—	930		—
Repurchases of assets/loss reimbursements (2):
Non-agency securitizations and whole loan transactions	5			—	4		—
Agency securitizations (3)	20			—	22		—
Servicing advances, net of repayments	(90		)	—	(52	)	—
Nine months ended September 30,
Proceeds from securitizations and whole loan sales	$	172,837		25	178,301		186
Fees from servicing rights retained	2,520			—	2,636		—
Cash flows from other interests held (1)	1,883			—	1,964		1
Repurchases of assets/loss reimbursements (2):
Non-agency securitizations and whole loan transactions	12			—	22		—
Agency securitizations (3)	66			—	104		—
Servicing advances, net of repayments	(252		)	—	(159	)	—


(1)	Cash flows from other interests held include principal and interest payments received on retained bonds and excess cash flows received on interest-only strips.


(2)	Consists of cash paid to repurchase loans from investors and cash paid to investors to reimburse them for losses on individual loans that are already liquidated.

(3)

Represent loans repurchased from GNMA, FNMA, and FHLMC under representation and warranty provisions included in our loan sales contracts. Third quarter and first nine months of 2017 exclude $2.1 billion and $6.0 billion, respectively in delinquent insured/guaranteed loans that we service and have exercised our option to purchase out of GNMA pools, compared with $2.4 billion and $7.3 billion, respectively, in the same periods of 2016. These loans are predominantly insured by the FHA or guaranteed by the VA.

In the third quarter and first nine months of 2017, we recognized net gains of $91 million and $616 million, respectively, from transfers accounted for as sales of financial assets, compared with $141 million and $436 million, respectively, in the same periods of 2016. These net gains largely relate to commercial mortgage securitizations and residential mortgage securitizations where the loans were not already carried at fair value.

Sales with continuing involvement during the third quarter and first nine months of 2017 and 2016 largely related to securitizations of residential mortgages that are sold to the government-sponsored entities (GSEs), including FNMA, FHLMC and GNMA (conforming residential mortgage securitizations). During the third quarter and first nine months of 2017, we transferred $57.8 billion and $163.0 billion, respectively, in fair value of residential mortgages to unconsolidated VIEs and third-party investors and recorded the transfers as sales, compared with $63.3 billion and $165.6 billion, respectively, in the same periods of 2016. Substantially all of these transfers did not result in a gain or loss because the loans were already carried at fair value. In connection with all of these transfers, in the first nine months of 2017, we recorded a $1.5 billion servicing asset, measured at fair value using a Level 3 measurement technique, securities of $2.2 billion, classified as Level 2, and a $20 million liability for repurchase losses which reflects management’s estimate of probable losses related to various representations and warranties for the loans transferred, initially measured at fair value. In the first nine months of 2016, we recorded a $1.3 billion servicing asset, securities of $3.0 billion, and a $26 million liability.

Table 7.4 presents the key weighted-average assumptions we used to measure residential mortgage servicing rights at the date of securitization.

Table 7.4: Residential Mortgage Servicing Rights



	Residential mortgage servicing rights
	2017			2016
Quarter ended September 30,
Prepayment speed (1)	12.1		%	12.4
Discount rate	6.9			6.2
Cost to service ($ per loan) (2)	$	122		124
Nine months ended September 30,
Prepayment speed (1)	11.7		%	12.5
Discount rate	6.9			6.5
Cost to service ($ per loan) (2)	$	135		136


(1)	The prepayment speed assumption for residential mortgage servicing rights includes a blend of prepayment speeds and default rates. Prepayment speed assumptions are influenced by mortgage interest rate inputs as well as our estimation of drivers of borrower behavior.


(2)	Includes costs to service and unreimbursed foreclosure costs, which can vary period to period depending on the mix of modified government-guaranteed loans sold to GNMA.

During the third quarter and first nine months of 2017, we transferred $4.6 billion and $11.2 billion, respectively, in carrying value of commercial mortgages to unconsolidated VIEs and third-party investors and recorded the transfers as sales, compared with $4.0 billion and $13.9 billion, respectively, in the same periods of 2016. These transfers resulted in gains of $89 million and $265 million in the third quarter and first nine months of 2017, respectively, because the loans were carried at lower of cost or market value (LOCOM), compared with gains of $134 million and $327 million, respectively, in the same periods of 2016. In connection with these transfers, in the first nine months of 2017, we recorded a servicing asset of $123 million, initially measured at fair value using a Level 3 measurement technique, and securities of $65 million, classified as Level 2. In the first nine months of 2016, we recorded a servicing asset of $204 million and securities of $236 million.

Retained Interests from Unconsolidated VIEs

Table 7.5 provides key economic assumptions and the sensitivity of the current fair value of residential mortgage servicing rights and other interests held to immediate adverse changes in those assumptions. “Other interests held” relate to residential and commercial mortgage loan securitizations. Residential mortgage-backed securities retained in securitizations issued through GSEs, such as FNMA, FHLMC and GNMA, are excluded from the table because these securities have a remote risk of credit loss due to the GSE guarantee. These securities also have economic characteristics similar to GSE mortgage-backed securities that we purchase, which are not included in the table. Subordinated interests include only those bonds whose credit rating was below AAA by a major rating agency at issuance. Senior interests include only those bonds whose credit rating was AAA by a major rating agency at issuance. The information presented excludes trading positions held in inventory.

Table 7.5: Retained Interests from Unconsolidated VIEs



				Other interests held
	Residential mortgage servicing rights (1)			Interest-only strips	Consumer			Commercial (2)
($ in millions, except cost to service amounts)	Residential mortgage servicing rights (1)			Interest-only strips	Subordinated bonds			Subordinated bonds	Senior bonds
Fair value of interests held at September 30, 2017	$	13,338		23	—			561	526
Expected weighted-average life (in years)	6.1			3.8	0.0			5.7	5.2
Key economic assumptions:
Prepayment speed assumption (3)	10.8		%	17.4	—
Decrease in fair value from:
10% adverse change	$	575		1	—
25% adverse change	1,359			2	—
Discount rate assumption	6.7		%	12.7	—			3.0	2.9
Decrease in fair value from:
100 basis point increase	$	647		—	—			25	22
200 basis point increase	1,236			1	—			47	44
Cost to service assumption ($ per loan)	145
Decrease in fair value from:
10% adverse change	476
25% adverse change	1,189
Credit loss assumption					—		%	2.0	—
Decrease in fair value from:
10% higher losses					$	—		—	—
25% higher losses					—			—	—
Fair value of interests held at December 31, 2016	$	12,959		28	1			249	552
Expected weighted-average life (in years)	6.3			3.9	8.3			3.1	5.1
Key economic assumptions:
Prepayment speed assumption (3)	10.3		%	17.4	13.5
Decrease in fair value from:
10% adverse change	$	583		1	—
25% adverse change	1,385			2	—
Discount rate assumption	6.8		%	13.3	10.7			5.2	2.7
Decrease in fair value from:
100 basis point increase	$	649		1	—			7	23
200 basis point increase	1,239			1	—			12	45
Cost to service assumption ($ per loan)	155
Decrease in fair value from:
10% adverse change	515
25% adverse change	1,282
Credit loss assumption					3.0		%	4.7	—
Decrease in fair value from:
10% higher losses					$	—		—	—
25% higher losses					—			—	—


(1)	See narrative following this table for a discussion of commercial mortgage servicing rights.


(2)	Prepayment speed assumptions do not significantly impact the value of commercial mortgage securitization bonds as the underlying commercial mortgage loans experience significantly lower prepayments due to certain contractual restrictions, impacting the borrower’s ability to prepay the mortgage.


(3)	The prepayment speed assumption for residential mortgage servicing rights includes a blend of prepayment speeds and default rates. Prepayment speed assumptions are influenced by mortgage interest rate inputs as well as our estimation of drivers of borrower behavior.

In addition to residential mortgage servicing rights (MSRs) included in the previous table, we have a small portfolio of commercial MSRs with a fair value of $2.0 billion at both September 30, 2017, and December 31, 2016. The nature of our commercial MSRs, which are carried at LOCOM, is different from our residential MSRs. Prepayment activity on serviced loans does not significantly impact the value of commercial MSRs because, unlike residential mortgages, commercial mortgages experience significantly lower prepayments due to certain contractual restrictions, impacting the borrower’s ability to prepay the mortgage. Additionally, for our commercial MSR portfolio, we are typically master/primary servicer, but not the special servicer, who is separately responsible for the servicing and workout of delinquent and foreclosed loans. It is the special servicer, similar to our role as servicer of residential mortgage loans, who is affected by higher servicing and foreclosure costs due to an increase in delinquent and foreclosed loans. Accordingly, prepayment speeds and costs to service are not key assumptions for commercial MSRs as they do not significantly impact the valuation. The primary economic driver impacting the fair value of our commercial MSRs is forward interest rates, which are derived from market observable yield curves used to price capital markets instruments. Market interest rates significantly affect interest earned on custodial deposit balances. The sensitivity of the current fair value to an immediate adverse 25% change in the assumption about interest earned on deposit balances at September 30, 2017, and December 31, 2016, results in a decrease in fair value of $238 million and $259 million, respectively. See Note 8 (Mortgage Banking Activities) for further information on our commercial MSRs.

We also have a loan to an unconsolidated third party VIE that we extended in fourth quarter 2014 in conjunction with our sale of government guaranteed student loans. The loan is carried at amortized cost and approximates fair value at September 30, 2017, and December 31, 2016. The carrying amount of the loan at September 30, 2017, and December 31, 2016, was $1.3 billion and $3.2 billion, respectively. The estimated fair value of the loan is considered a Level 3 measurement that is determined using discounted cash flows that are based on changes in the discount rate due to changes in the risk premium component (credit spreads). The primary economic assumption impacting the fair value of our loan is the discount rate. Changes in the credit loss assumption are not expected to affect the estimated fair value of the loan due to the government guarantee of the underlying collateral. The sensitivity of the current fair value to an immediate adverse increase of 200 basis points in the risk premium component of the discount rate assumption is a decrease in fair value of $23 million and $154 million at September 30, 2017, and December 31, 2016, respectively.

The sensitivities in the preceding paragraphs and table are hypothetical and caution should be exercised when relying on this data. Changes in value based on variations in assumptions generally cannot be extrapolated because the relationship of the change in the assumption to the change in value may not be linear. Also, the effect of a variation in a particular assumption on the value of the other interests held is calculated independently without changing any other assumptions. In reality, changes in one factor may result in changes in others (for example, changes in prepayment speed estimates could result in changes in the credit losses), which might magnify or counteract the sensitivities.

Off-Balance Sheet Loans

Table 7.6 presents information about the principal balances of off-balance sheet loans that were sold or securitized, including residential mortgage loans sold to FNMA, FHLMC, GNMA and other investors, for which we have some form of continuing involvement (including servicer). Delinquent loans include loans 90 days or more past due and loans in bankruptcy, regardless of delinquency status. For loans sold or securitized where servicing is our only form of continuing involvement, we would only experience a loss if we were required to repurchase a delinquent loan or foreclosed asset due to a breach in representations and warranties associated with our loan sale or servicing contracts.

Table 7.6: Off-Balance Sheet Loans Sold or Securitized



						Net charge-offs
	Total loans			Delinquent loans and foreclosed assets (1)		Nine months ended September 30,
(in millions)	Sep 30, 2017		Dec 31, 2016	Sep 30, 2017	Dec 31, 2016	2017	2016
Commercial:
Real estate mortgage	$	98,350	106,745	2,879	3,325	718	210
Total commercial	98,350		106,745	2,879	3,325	718	210
Consumer:
Real estate 1-4 family first mortgage	1,135,409		1,160,191	12,434	16,453	546	764
Total consumer	1,135,409		1,160,191	12,434	16,453	546	764
Total off-balance sheet sold or securitized loans (2)	$	1,233,759	1,266,936	15,313	19,778	1,264	974


(1)	Includes $1.4 billion and $1.7 billion of commercial foreclosed assets and $1.1 billion and $1.8 billion of consumer foreclosed assets at September 30, 2017, and December 31, 2016, respectively.

(2)

At September 30, 2017, and December 31, 2016, the table includes total loans of $1.2 trillion at both dates, delinquent loans of $7.6 billion and $9.8 billion, and foreclosed assets of $730 million and $1.3 billion, respectively, for FNMA, FHLMC and GNMA. Net charge-offs exclude loans sold to FNMA, FHLMC and GNMA as we do not service or manage the underlying real estate upon foreclosure and, as such, do not have access to net charge-off information.

Transactions with Consolidated VIEs and Secured Borrowings

Table 7.7 presents a summary of financial assets and liabilities for asset transfers accounted for as secured borrowings and involvements with consolidated VIEs. Carrying values of “Assets” are presented using GAAP measurement methods, which may include fair value, credit impairment or other adjustments, and therefore in some instances will differ from “Total VIE assets.” For VIEs that obtain exposure synthetically through derivative instruments, the remaining notional amount of the derivative is included in “Total VIE assets.” On the consolidated balance sheet, we separately disclose the consolidated assets of certain VIEs that can only be used to settle the liabilities of those VIEs.

Table 7.7: Transactions with Consolidated VIEs and Secured Borrowings



			Carrying value
(in millions)	Total VIE assets		Assets	Liabilities		Noncontrolling interests		Net assets
September 30, 2017
Secured borrowings:
Municipal tender option bond securitizations	$	670	572	(539	)	—		33
Commercial real estate loans	392		392	(388	)	—		4
Residential mortgage securitizations	119		116	(117	)	—		(1	)
Total secured borrowings	1,181		1,080	(1,044	)	—		36
Consolidated VIEs:
Commercial and industrial loans and leases	8,546		8,051	(1,425	)	(14	)	6,612
Nonconforming residential mortgage loan securitizations	2,812		2,486	(837	)	—		1,649
Commercial real estate loans	2,120		2,120	—		—		2,120
Structured asset finance	13		8	(6	)	—		2
Investment funds	135		135	(1	)	(72	)	62
Other	118		104	(1	)	(33	)	70
Total consolidated VIEs	13,744		12,904	(2,270	)	(119	)	10,515
Total secured borrowings and consolidated VIEs	$	14,925	13,984	(3,314	)	(119	)	10,551
December 31, 2016
Secured borrowings:
Municipal tender option bond securitizations	$	1,473	998	(907	)	—		91
Residential mortgage securitizations	139		138	(136	)	—		2
Total secured borrowings	1,612		1,136	(1,043	)	—		93
Consolidated VIEs:
Commercial and industrial loans and leases	8,821		8,623	(2,819	)	(14	)	5,790
Nonconforming residential mortgage loan securitizations	3,349		2,974	(1,003	)	—		1,971
Commercial real estate loans	1,516		1,516	—		—		1,516
Structured asset finance	23		13	(9	)	—		4
Investment funds	142		142	(2	)	(67	)	73
Other	166		146	(1	)	(57	)	88
Total consolidated VIEs	14,017		13,414	(3,834	)	(138	)	9,442
Total secured borrowings and consolidated VIEs	$	15,629	14,550	(4,877	)	(138	)	9,535

INVESTMENT FUNDS Subsequent to adopting ASU 2015-02 (Amendments to the Consolidation Analysis) in first quarter 2016, we consolidate certain investment funds because we have both the power to manage fund assets and hold variable interests that are considered significant.

OTHER CONSOLIDATED VIE STRUCTURES In addition to the structure types included in the previous table, at December 31, 2016, we had approximately $6.0 billion of private placement debt financing issued through a consolidated VIE. The issuance was classified as long-term debt in our consolidated financial statements. At December 31, 2016, we pledged approximately $434 million in loans (principal and interest eligible to be capitalized) and $6.1 billion in available-for-sale securities to collateralize the VIE’s borrowings. These assets were not transferred to the VIE, and accordingly we excluded the VIE from the previous table. During second quarter 2017, the private placement debt financing was repaid, and the entity was no longer considered a VIE.

For complete descriptions of our accounting for transfers accounted for as secured borrowings and involvements with consolidated VIEs, see Note 8 (Securitizations and Variable Interest Entities) to Financial Statements in our 2016 Form 10-K.