Ally Bank 2011 Annual Report Download - page 167

Table of Contents
Notes to Consolidated Financial Statements
Ally Financial Inc. • Form 10−K
On−balance Sheet Variable Interest Entities
We engage in securitization and other financing transactions that do not qualify for off−balance sheet treatment. In these situations, we hold beneficial
interests or other interests in the VIE, which represent a form of significant continuing economic interest. The interests held include, but are not limited to,
senior or subordinate mortgage− or asset−backed securities, interest−only strips, principal−only strips, residuals, and servicing rights. Certain of these
retained interests provide credit enhancement to the securitization entity as they may absorb credit losses or other cash shortfalls. Additionally, the
securitization documents may require cash flows to be directed away from certain of our retained interests due to specific over−collateralization
requirements, which may or may not be performance−driven. Because these securitization entities are consolidated, these retained interests and servicing
rights are not recognized as separate assets on our Consolidated Balance Sheet.
Subsequent to adoption of ASU 2009−17 as of January 1, 2010, we consolidated certain of these entities because we had a controlling financial
interest in the VIE, primarily due to our servicing activities, and because we hold a significant variable interest in the VIE. Under ASC 810, Consolidation,
as amended by ASU 2009−17, we are generally the primary beneficiary of automobile securitization entities, as well as certain mortgage private−label
securitization entities for which we perform servicing activities and have retained a significant variable interest in the form of a beneficial interest. In cases
where we did not meet sale accounting under previous guidance, unless we have made modifications to the overall transaction, we do not meet sale
accounting under current guidance as we are not permitted to revisit sale accounting guidelines under the current guidance. In cases where substantive
modifications are made, we then reassess the transaction under the amended guidance, based on the new circumstances.
The consolidated VIEs included in the table below represent separate entities with which we are involved. The third−party investors in the obligations
of consolidated VIEs have legal recourse only to the assets of the VIEs and do not have such recourse to us, except for the customary representation and
warranty provisions or when we are the counterparty to certain derivative transactions involving the VIE. In addition, the cash flows from the assets are
restricted only to pay such liabilities. Thus, our economic exposure to loss from outstanding third−party financing related to consolidated VIEs is
significantly less than the carrying value of the consolidated VIE assets. All assets are restricted for the benefit of the beneficial interest holders. Refer to
Note 27 for discussion of the assets and liabilities for which the fair value option has been elected.
December 31, ($ in millions) 2011 2010
Assets
Loans held−for−sale, net $ 9 $ 21
Finance receivables and loans, net
Consumer 21,622 18,744
Commercial 19,313 14,739
Allowance for loan losses (210) (238)
Total finance receivables and loans, net 40,725 33,245
Investment in operating leases, net 4,389 1,065
Other assets 3,029 3,194
Assets of operations held−for−sale — 85
Total assets $ 48,152 $ 37,610
Liabilities
Short−term borrowings $ 795 $ 964
Long−term debt 33,143 24,466
Interest payable 14 15
Accrued expenses and other liabilities 405 352
Liabilities of operations held−for−sale — 45
Total liabilities $ 34,357 $ 25,842
Off−balance Sheet Variable Interest Entities
The nature, purpose, and activities of nonconsolidated securitization entities are similar to those of our consolidated securitization entities with the
primary difference being the nature and extent of our continuing involvement. The cash flows from the assets of nonconsolidated securitization entities
generally are the sole source of payment on the securitization entities' liabilities. The creditors of these securitization entities have no recourse to us with the
exception of market customary representation and warranty provisions as described in Note 31.
Subsequent to the adoption of ASU 2009−17 as of January 1, 2010, nonconsolidated VIEs include entities for which we either do not hold significant
variable interests or do not provide servicing or asset management functions for the financial assets held by the securitization entity. Additionally, to qualify
for off−balance sheet treatment, transfers of financial assets must meet the sale accounting conditions in ASC 860, Transfers and Servicing. Our residential
mortgage loan securitizations consist of GSEs and private−label securitizations. Under
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