HR Block 2007 Annual Report Download - page 109

investors. The proceeds from the bonds are returned to us as payment proceeds of $25.2 million from the transactions and retained a
for the residual interests. The bonds are secured by the pooled residual $4.3 million AFS residual interest. During fiscal year 2006, we completed
interests and are obligations of the NIM trust. We retain a subordinated sales of previously securitized residual interests and recorded gains of
interest in the NIM trust, and receive cash flows on our residual interest $31.5 million. We received cash proceeds of $62.4 million from the
generally after the bonds issued to the third-party investors are paid in transactions and retained a $10.0 million AFS residual interest. These
full. Residual interests retained from NIM securitizations may also be sales accelerate cash flows from the residual interests, effectively
bundled and sold in a subsequent securitization. The new residual realizing previously recorded unrealized gains included in other
interests are classified as AFS securities. comprehensive income.
Activity related to AFS residual interests in securitizations consists of The following transactions were treated as non-cash investing
the following: activities in the consolidated statement of cash flows:
(in 000s) (in 000s)
April 30, 2007 2006 Year Ended April 30, 2007 2006
Balance, beginning of year $159,058 $205,936 Residual interests mark-to-market $13,832 $35,274
Additions (resulting from NIM transactions) 127,580 61,651 Additions to AFS residual interests 127,580 61,651
Cash received (13,631) (80,539)
Residual interests from NIM securitizations are classified as AFS
Cash proceeds from sales and securitizations of
securities and are reported at fair value. Gross unrealized holding gains
residual interests (25,207) (62,396)
Accretion 48,552 108,396
represent the increase in fair value of residual interests as a result of
Impairments of fair value (168,878) (34,107)
lower interest rates, loan losses or loan prepayments to date than most
Other (1,672) (1,583)
recently projected in our valuation models.
Change in unrealized holding gains arising during
Aggregate net unrealized gains on AFS residual interests, which had
the period (35,519) (38,300)
not yet been accreted into income, totaled $1.3 million and $44.1 million
Balance, end of year $90,283 $159,058
at April 30, 2007 and 2006, respectively. These unrealized gains are
recorded net of deferred taxes in other comprehensive income, and may
Prime mortgage loans are sold in loan sales, servicing released, to
be recognized in income in future periods either through accretion or
third-party buyers.
81 m
upon further securitization of the related residual interest.
We sold $27.5 billion and $40.3 billion of mortgage loans in loan sales
Included in prepaid expenses and other current assets of
to the Trusts and other buyers during the years ended April 30, 2007 and
discontinued operations as of April 30, 2007 and 2006, is $378.6 million
2006, respectively. Gains totaling $102.0 million and $648.7 million were
and $255.2 million, respectively, in default advances, escrow advances
recorded on these sales, respectively.
and principal and interest advances related to the servicing of non-
Trading residual interests initially valued at $426.7 million and
prime loans.
$356.8 million were securitized in NIM transactions during the years
Activity related to MSRs consists of the following:
ended April 30, 2007 and 2006, respectively. Net cash proceeds of
(in 000s)
$299.1 million and $295.2 million were received from the NIM
April 30, 2007 2006
transactions for the years ended April 30, 2007 and 2006, respectively.
Total net additions to AFS residual interests for the years ended
Balance, beginning of year $272,472 $166,614
Additions 172,263 250,537
April 30, 2007 and 2006 were $127.6 million and $61.7 million,
Amortization (190,274) (144,359)
respectively.
Impairments of fair value (1,394) (320)
Cash flows from AFS residual interests of $13.6 million and
Balance, end of year $253,067 $272,472
$80.5 million were received from the securitization trusts for the years
ended April 30, 2007 and 2006, respectively. An additional $25.2 million Estimated amortization of MSRs for fiscal years 2008, 2009, 2010, 2011
and $62.4 million was received during fiscal years 2007 and 2006, and 2012 is $135.2 million, $67.7 million, $30.6 million, $12.1 million and
respectively, as a result of the sale of previously securitized residuals, as $4.2 million, respectively. The fair value of MSRs at April 30, 2007 was
discussed below. Cash received on AFS residual interests is included in $397.5 million.
investing activities of discontinued operations on the consolidated
statements of cash flows.
During fiscal year 2007, we completed sales of previously securitized
residual interests and recorded gains of $7.0 million. We received cash
H&R BLOCK 2007 Form 10K