PNC Bank 2014 Annual Report Download - page 142

low income housing tax credits that were accounted for under
ASU 2014-01 was $1.8 billion. These investments are
reflected in Equity investments on our Consolidated Balance
Sheet.
In July 2013, the FASB issued ASU 2013-11, Income Taxes
(Topic 740): Presentation of an Unrecognized Tax Benefit
When a Net Operating Loss Carryforward, a Similar Tax
Loss, or a Tax Credit Carryforward Exists. This ASU clarified
existing guidance to require that an unrecognized tax benefit
or a portion thereof be presented in the statement of financial
position as a reduction to a deferred tax asset for a net
operating loss (NOL) carryforward, similar tax loss, or a tax
credit carryforward except when an NOL carryforward,
similar tax loss, or tax credit carryforward is not available
under the tax law of the applicable jurisdiction to settle any
additional income taxes that would result from the
disallowance of a tax position. In such a case, the
unrecognized tax benefit should be presented in the statement
of financial position as a liability. This ASU was effective for
fiscal years, and interim periods within those years, beginning
after December 15, 2013. We adopted ASU 2013-11 in the
first quarter of 2014 using prospective application to all
unrecognized tax benefits that existed at the effective date.
Adoption of this ASU did not have a material effect on our
results of operations or financial position.
In June 2013, the FASB issued ASU 2013-08, Financial
Services – Investment Companies (Topic 946): Amendments
to the Scope, Measurement and Disclosure Requirements.
This ASU modified the guidance in ASC 946 for determining
whether an entity is an investment company, as well as the
measurement and disclosure requirements for investment
companies. The ASU does not change current accounting
where a noninvestment company parent retains the specialized
accounting applied by an investment company subsidiary in
consolidation. We prospectively adopted ASU 2013-08 in the
first quarter of 2014. Adoption of the ASU did not have a
material effect on our results of operations or financial
position. See Note 7 Fair Value for the new required
disclosures.
N
OTE 2L OAN S ALE AND S ERVICING A CTIVITIES
AND
V ARIABLE I NTEREST E NTITIES
Loan Sale and Servicing Activities
We have transferred residential and commercial mortgage
loans in securitization or sales transactions in which we have
continuing involvement. These transfers have occurred
through Agency securitization, Non-agency securitization, and
loan sale transactions. Agency securitizations consist of
securitization transactions with Federal National Mortgage
Association (FNMA), Federal Home Loan Mortgage
Corporation (FHLMC) and Government National Mortgage
Association (GNMA) (collectively the Agencies). FNMA and
FHLMC generally securitize our transferred loans into
mortgage-backed securities for sale into the secondary market
through special purpose entities (SPEs) that they sponsor. We,
as an authorized GNMA issuer/servicer, pool Federal Housing
Administration (FHA) and Department of Veterans Affairs
(VA) insured loans into mortgage-backed securities for sale
into the secondary market. In Non-agency securitizations, we
have transferred loans into securitization SPEs. In other
instances, third-party investors have also purchased our loans
in loan sale transactions and in certain instances have
subsequently sold these loans into securitization SPEs.
Securitization SPEs utilized in the Agency and Non-agency
securitization transactions are variable interest entities (VIEs).
Our continuing involvement in the FNMA, FHLMC, and
GNMA securitizations, Non-agency securitizations, and loan
sale transactions generally consists of servicing, repurchasing
previously transferred loans under certain conditions and loss
share arrangements, and, in limited circumstances, holding of
mortgage-backed securities issued by the securitization SPEs.
Depending on the transaction, we may act as the master,
primary, and/or special servicer to the securitization SPEs or
third-party investors. Servicing responsibilities typically
consist of collecting and remitting monthly borrower principal
and interest payments, maintaining escrow deposits,
performing loss mitigation and foreclosure activities, and, in
certain instances, funding of servicing advances. Servicing
advances, which are reimbursable, are made for principal and
interest and collateral protection and are recognized in Other
assets at cost.
We earn servicing and other ancillary fees for our role as
servicer and, depending on the contractual terms of the
servicing arrangement, we can be terminated as servicer with
or without cause. At the consummation date of each type of
loan transfer where PNC retains the servicing, we recognize a
servicing right at fair value. See Note 7 Fair Value and Note 8
Goodwill and Other Intangible Assets for further discussion of
our servicing rights.
Certain loans transferred to the Agencies contain removal of
account provisions (ROAPs). Under these ROAPs, we hold an
option to repurchase at par individual delinquent loans that
meet certain criteria. In other limited cases, the U.S.
Department of Housing and Urban Development (HUD) has
granted us the right to repurchase current loans when we
intend to modify the borrower’s interest rate under established
guidelines. When we have the unilateral ability to repurchase
a loan, effective control over the loan has been regained and
we recognize an asset (in either Loans or Loans held for sale)
and a corresponding liability (in Other borrowed funds) on the
balance sheet regardless of our intent to repurchase the loan.
At December 31, 2014 and December 31, 2013, these assets
and liabilities both totaled $136 million and $128 million,
respectively.
The Agency and Non-agency mortgage-backed securities
issued by the securitization SPEs that are purchased and held
on our balance sheet are typically purchased in the secondary
market. PNC does not retain any credit risk on its Agency
mortgage-backed security positions as FNMA, FHLMC, and
the U.S. Government (for GNMA) guarantee losses of
principal and interest. Substantially all of the Non-agency
mortgage-backed securities acquired and held on our balance
sheet are senior tranches in the securitization structure.
124 The PNC Financial Services Group, Inc. – Form 10-K