PNC Bank 2015 Annual Report Download - page 140

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, 2015 and December 31, 2014, these assets
and liabilities both totaled $120 million and $136 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.
We also have involvement with certain Agency and Non-
agency commercial securitization SPEs where we have not
transferred commercial mortgage loans. These SPEs were
sponsored by independent third-parties and the loans held by
these entities were purchased exclusively from other third-
parties. Generally, our involvement with these SPEs is as
servicer with servicing activities consistent with those
described above.
We recognize a liability for our loss exposure associated with
contractual obligations to repurchase previously transferred
loans due to breaches of representations and warranties and
also for loss sharing arrangements (recourse obligations) with
the Agencies. Other than providing temporary liquidity under
servicing advances and our loss exposure associated with our
repurchase and recourse obligations, we have not provided nor
are we required to provide any type of credit support,
guarantees, or commitments to the securitization SPEs or
third-party investors in these transactions. See Note 21
Commitments and Guarantees for further discussion of our
repurchase and recourse obligations.
The following table provides cash flows associated with PNC’s loan sale and servicing activities:
Table 50: Cash Flows Associated with Loan Sale and Servicing Activities
In millions
Residential
Mortgages
Commercial
Mortgages (a)
Home Equity
Loans/Lines (b)
CASH FLOWS – Year ended December 31, 2015
Sales of loans (c) $8,121 $4,398
Repurchases of previously transferred loans (d) 580 $135
Servicing fees (e) 339 120 15
Servicing advances recovered/(funded), net 90 48 3
Cash flows on mortgage-backed securities held (f) 1,458 184
CASH FLOWS – Year ended December 31, 2014
Sales of loans (c) $8,344 $3,469
Repurchases of previously transferred loans (d) 744 $ 14
Servicing fees (e) 346 132 19
Servicing advances recovered/(funded), net 70 113 (20)
Cash flows on mortgage-backed securities held (f) 934 308
(a) Represents cash flow information associated with both commercial mortgage loan transfer and servicing activities.
(b) These activities were part of an acquired brokered home equity lending business in which PNC is no longer engaged.
(c) Gains/losses recognized on sales of loans were insignificant for the periods presented.
(d) Includes residential mortgage government insured or guaranteed loans eligible for repurchase through the exercise of our ROAP option, and loans repurchased due to alleged breaches
of origination covenants or representations and warranties made to purchasers. Includes home equity lines of credit repurchased at the end of their draw periods due to contractual
requirements.
(e) Includes contractually specified servicing fees, late charges and ancillary fees.
(f) Represents cash flows on securities we hold issued by a securitization SPE in which PNC transferred to and/or services loans. The carrying value of such securities held were $6.6
billion in residential mortgage-backed securities and $1.3 billion in commercial mortgage-backed securities at December 31, 2015 and $3.4 billion in residential mortgage-backed
securities and $1.3 billion in commercial mortgage-backed securities at December 31, 2014.
122 The PNC Financial Services Group, Inc. – Form 10-K