XML 46 R32.htm IDEA: XBRL DOCUMENT v3.23.2
Non-consolidated variable interest entities
 6 Months Ended
Jun. 30, 2023
Variable Interest Entity  
Variable interest entity disclosure
Note 22 – Non-consolidated variable interest
 
entities
The Corporation is
 
involved with
three
 
statutory trusts which
 
it created 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 June 30, 2023
.
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
 
24
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
for
 
additional
information on the
 
debt securities outstanding at
 
June 30, 2023
 
and December 31,
 
2022, 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 June 30, 2023 and December 31,
 
2022.
(In thousands)
June 30, 2023
December 31, 2022
Assets
Servicing assets:
Mortgage servicing rights
$
95,714
$
99,614
Total servicing
 
assets
 
$
95,714
$
99,614
Other assets:
Servicing advances
$
6,103
$
6,157
Total other assets
$
6,103
$
6,157
Total assets
$
101,817
$
105,771
Maximum exposure to loss
$
101,817
$
105,771
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 $
7.5
 
billion at June 30, 2023 (December 31, 2022 -
 
$
7.7
 
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 June 30, 2023 and December 31, 2022, 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 June 30, 2023.