PNC Bank 2015 Annual Report Download - page 139

Reclassification of Residential Real Estate Collateralized
Consumer Mortgage Loans upon Foreclosure. We adopted
this guidance as of January 1, 2015. Adoption of this ASU did
not have a material effect on our results of operations or
financial position.
In January 2014, the FASB issued ASU 2014-04, Receivables
– Troubled Debt Restructurings by Creditors (Subtopic 310-
40): Reclassification of Residential Real Estate Collateralized
Consumer Mortgage Loans upon Foreclosure. This ASU
clarifies that an in substance repossession or foreclosure is
considered to have occurred, and a creditor is considered to
have received physical possession of residential real estate
property collateralizing a consumer mortgage loan, upon a)
the creditor obtaining legal title to the residential real estate
property upon completion of a foreclosure or b) the borrower
conveying all interest in the residential real estate property to
the creditor to satisfy the loan through completion of a deed in
lieu of foreclosure or through a similar legal agreement. We
adopted this guidance as of January 1, 2015. Adoption of this
ASU did not have a material effect on our results of operations
or financial position.
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 carried 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 Intangible Assets for further discussion of our
servicing rights.
The PNC Financial Services Group, Inc. – Form 10-K 121