Ally Bank 2012 Annual Report Download - page 186

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Excluded from the fair value option were conforming and government-insured loans funded on or prior to July 31, 2009, and
those repurchased or rerecognized. The loans funded on or prior to July 31, 2009, were ineligible because the election must be made
at the time of funding. Repurchased and rerecognized conforming and government-insured loans were not elected because the
election would not mitigate earning volatility. We repurchase or rerecognize loans due to representation and warranty obligations or
conditional repurchase options. Typically, we will be unable to resell these assets through regular channels due to characteristics of
the assets. Since the fair value of these assets is influenced by factors that cannot be hedged, we did not elect the fair value option.
We carry the fair value-elected conforming and government-insured loans as loans held-for-sale, net, on the Consolidated
Balance Sheet. Our policy is to separately record interest income on the fair value-elected loans (unless they are placed on
nonaccrual status); however, the accrued interest was excluded from the fair value presentation. Upfront fees and costs related to the
fair value-elected loans were not deferred or capitalized. The fair value adjustment recorded for these loans is classified as gain
(loss) on mortgage loans, net, in the Consolidated Statement of Income. In accordance with GAAP, the fair value option election is
irrevocable once the asset is funded even if it is subsequently determined that a particular loan cannot be sold.
• Nongovernment-eligible mortgage loans held-for-sale subject to conditional repurchase options — We elected the fair value
option for both nongovernment-eligible mortgage loans held-for-sale subject to conditional repurchase options and the related
liability. These conditional repurchase options within our private label securitizations allowed us to repurchase a transferred
financial asset if certain events outside our control were met. The typical conditional repurchase option was a delinquent loan
repurchase option that gave us the option to purchase the loan if it exceeded a certain prespecified delinquency level. We had
complete discretion regarding when or if we would exercise these options, but generally we would do so only when it is in our best
interest. We recorded the asset and the corresponding liability on our balance sheet when the option becomes exercisable. The fair
value option election must be made at initial recording. As such, the conditional repurchase option assets and liabilities recorded
prior to January 1, 2011, were ineligible for the fair value election.
We carried these fair value-elected optional repurchase loan balance as loans held-for-sale, net, on the Consolidated Balance
Sheet. The fair value adjustment recorded for these loans was classified as other income, net of losses, in the Consolidated
Statement of Income. We carried the fair value-elected corresponding liability as accrued expenses and other liabilities on the
Consolidated Balance Sheet. The fair value adjustment recorded for these liabilities were classified as other income, net of losses, in
the Consolidated Statement of Income.
Table of Contents
Notes to Consolidated Financial Statements
Ally Financial Inc. • Form 10-K