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Non-consolidated variable interest entities
 12 Months Ended
Dec. 31, 2022
Variable Interest Entity  
Variable interest entity disclosure
Note 25 – Non-consolidated variable interest
 
entities
The Corporation
 
is involved
 
with three
 
statutory trusts
 
which it
 
established to
 
issue trust
 
preferred securities
 
to the
 
public. These
trusts
 
are
 
deemed to
 
be
 
variable
 
interest
 
entities (“VIEs”)
 
since
 
the
 
equity
 
investors at
 
risk
 
have no
 
substantial decision-making
rights. The
 
Corporation does
 
not hold
 
any variable
 
interest in
 
the trusts,
 
and therefore,
 
cannot be
 
the trusts’
 
primary beneficiary.
Furthermore, the Corporation
 
concluded that it
 
did not hold
 
a controlling financial
 
interest in these
 
trusts since the
 
decisions of the
trusts
 
are
 
predetermined
 
through
 
the
 
trust
 
documents
 
and
 
the
 
guarantee
 
of
 
the
 
trust
 
preferred
 
securities
 
is
 
irrelevant
 
since
 
in
substance the sponsor is guaranteeing its own debt.
Also, the
 
Corporation is
 
involved with
 
various special
 
purpose entities
 
mainly in
 
guaranteed mortgage
 
securitization transactions,
including
 
GNMA
 
and
 
FNMA.
 
The
 
Corporation
 
has
 
also
 
engaged
 
in
 
securitization
 
transactions
 
with
 
FHLMC,
 
but
 
considers
 
its
exposure in the
 
form of servicing
 
fees and servicing
 
advances not to be
 
significant at December
 
31, 2022.
 
These special purpose
entities
 
are
 
deemed
 
to
 
be
 
VIEs
 
since
 
they
 
lack
 
equity
 
investments
 
at
 
risk.
 
The
 
Corporation’s
 
continuing
 
involvement
 
in
 
these
guaranteed loan
 
securitizations includes
 
owning certain
 
beneficial interests in
 
the form
 
of securities as
 
well as
 
the servicing
 
rights
retained. The Corporation is not required to provide additional financial support to
 
any of the variable interest entities to which it has
transferred
 
the
 
financial
 
assets.
 
The
 
mortgage-backed
 
securities,
 
to
 
the
 
extent
 
retained,
 
are
 
classified
 
in
 
the
 
Corporation’s
Consolidated
 
Statements
 
of
 
Financial
 
Condition
 
as
 
available-for-sale
 
or
 
trading
 
securities.
 
The
 
Corporation
 
concluded
 
that,
essentially,
 
these
 
entities
 
(FNMA
 
and
 
GNMA)
 
control
 
the
 
design
 
of
 
their
 
respective
 
VIEs,
 
dictate
 
the
 
quality
 
and
 
nature
 
of
 
the
collateral, require
 
the underlying
 
insurance, set
 
the servicing
 
standards via
 
the servicing
 
guides and
 
can change
 
them at
 
will, and
can remove a
 
primary servicer with cause,
 
and without cause in
 
the case of
 
FNMA. Moreover, through
 
their guarantee obligations,
agencies (FNMA and GNMA) have the obligation
 
to absorb losses that could be potentially significant
 
to the VIE.
The
 
Corporation
 
holds
 
variable
 
interests
 
in
 
these
 
VIEs
 
in
 
the
 
form
 
of
 
agency
 
mortgage-backed
 
securities
 
and
 
collateralized
mortgage obligations, including those securities originated by the Corporation and those acquired from
 
third parties. Additionally, the
Corporation holds agency mortgage-backed securities
 
and agency collateralized mortgage obligations
 
issued by third party
 
VIEs in
which
 
it
 
has
 
no
 
other
 
form
 
of
 
continuing
 
involvement.
 
Refer
 
to
 
Note
 
28
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
for
 
additional
information
 
on
 
the
 
debt
 
securities
 
outstanding
 
at
 
December
 
31,
 
2022
 
and
 
2021,
 
which
 
are
 
classified
 
as
 
available-for-sale
 
and
trading securities
 
in the
 
Corporation’s Consolidated
 
Statements of
 
Financial Condition.
 
In addition,
 
the Corporation
 
holds variable
interests
 
in
 
the
 
form
 
of
 
servicing fees,
 
since
 
it
 
retains
 
the
 
right
 
to
 
service
 
the
 
transferred
 
loans
 
in
 
those
 
government-sponsored
special purpose entities (“SPEs”) and
 
may also purchase the
 
right to service loans
 
in other government-sponsored SPEs that
 
were
transferred to those SPEs by a third-party.
 
The following
 
table presents
 
the carrying
 
amount and
 
classification of
 
the assets
 
related to
 
the Corporation’s
 
variable interests
 
in
non-consolidated VIEs
 
and the
 
maximum exposure
 
to loss
 
as a
 
result of
 
the Corporation’s
 
involvement as
 
servicer of
 
GNMA and
FNMA loans at December 31, 2022 and 2021.
(In thousands)
December 31, 2022
December 31, 2021
Assets
Servicing assets:
Mortgage servicing rights
$
99,614
$
94,464
Total servicing
 
assets
 
$
99,614
$
94,464
Other assets:
Servicing advances
$
6,157
$
7,968
Total other assets
$
6,157
$
7,968
Total assets
$
105,771
$
102,432
Maximum exposure to loss
$
105,771
$
102,432
The size of
 
the non-consolidated VIEs,
 
in which the
 
Corporation has a
 
variable interest in
 
the form
 
of servicing fees,
 
measured as
the total unpaid principal balance of the loans,
 
amounted to $
7.7
 
billion at December 31, 2022 (December
 
31, 2021 - $
8.3
 
billion).
The Corporation
 
determined that
 
the maximum
 
exposure to
 
loss includes
 
the fair
 
value of
 
the MSRs
 
and the
 
assumption that
 
the
servicing advances
 
at December 31,
 
2022 and
 
2021 will
 
not be
 
recovered. The agency
 
debt securities are
 
not included as
 
part of
the maximum exposure to loss since they are guaranteed
 
by the related agencies.
ASU 2009-17 requires that an ongoing primary beneficiary assessment should be made to determine whether the Corporation is the
primary beneficiary of any of the VIEs it is
 
involved with. The conclusion on the assessment of these non-consolidated VIEs has not
changed
 
since
 
their
 
initial
 
evaluation.
 
The
 
Corporation
 
concluded
 
that
 
it
 
is
 
still
 
not
 
the
 
primary
 
beneficiary
 
of
 
these
 
VIEs,
 
and
therefore, these VIEs are not required to be consolidated
 
in the Corporation’s financial statements at December 31,
 
2022.