Ally Bank 2011 Annual Report Download - page 70

Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10−K
Loan and Lease Exposure
The following table summarizes the exposures from our loan and lease activities.
December 31, ($ in millions) 2011 2010
Finance receivables and loans
Global Automotive Services $ 100,734 $ 86,888
Mortgage operations 12,753 13,423
Corporate and Other 1,268 2,102
Total finance receivables and loans 114,755 102,413
Held−for−sale loans
Global Automotive Services 425 —
Mortgage operations 8,112 11,411
Corporate and Other 20 —
Total held−for−sale loans 8,557 11,411
Total on−balance sheet loans $ 123,312 $ 113,824
Off−balance sheet securitized loans
Global Automotive Services $ — $ —
Mortgage operations 326,975 326,830
Corporate and Other — —
Total off−balance sheet securitized loans $ 326,975 $ 326,830
Operating lease assets
Global Automotive Services $ 9,275 $ 9,128
Mortgage operations — —
Corporate and Other — —
Total operating lease assets $ 9,275 $ 9,128
Serviced loans and leases
Global Automotive Services $ 122,881 $ 114,379
Mortgage operations (a) 356,430 360,767
Corporate and Other 1,762 2,448
Total serviced loans and leases $ 481,073 $ 477,594
(a) Includes primary mortgage loan−servicing portfolio only.
The risks inherent in our loan and lease exposures are largely driven by changes in the overall economy, used vehicle pricing, unemployment levels,
and its impact to our borrowers. The potential financial statement impact of these exposures varies depending on the accounting classification and future
expected disposition strategy. We retain the majority of our automobile loans as they complement our core business model. We primarily originate
mortgage loans with the intent to sell them and, as such, retain only a small percentage of the loans that we originate or purchase. Loans that we do not
intend to retain are sold to investors, primarily securitizations guaranteed by GSEs. However, we may retain an interest or right to service these loans. We
ultimately manage the associated risks based on the underlying economics of the exposure.
• Finance receivables and loans — Loans that we have the intent and ability to hold for the foreseeable future or until maturity or loans associated
with an on−balance sheet securitization classified as secured financing. These loans are recorded at the principal amount outstanding, net of
unearned income and premiums and discounts. Probable credit−related losses inherent in our finance receivables and loans carried at historical
cost are reflected in our allowance for loan losses and recognized in current period earnings. We manage the economic risks of these exposures,
including credit risk, by adjusting underwriting standards and risk limits, augmenting our servicing and collection activities (including loan
modifications and restructurings), and optimizing our product and geographic concentrations. Additionally, we have elected to carry certain
mortgage loans at fair value. Changes in the fair value of these loans are recognized in a valuation allowance separate from the allowance for
loan losses and are reflected in current period earnings. We use market−based instruments, such as derivatives, to hedge changes in the fair value
of these loans. Refer to the Critical Accounting Estimates discussion within this MD&A and Note 1 to the Consolidated Financial Statements for
further information.
• Held−for−sale loans — Loans that we have the intent to sell. These loans are recorded on our balance sheet at the lower of cost or estimated fair
value and are evaluated by portfolio and product type. Changes in the recorded value are recognized in a valuation allowance and reflected in
current period earnings. We manage the economic risks of these exposures, including market and credit
67