Wells Fargo 2014 Annual Report Download - page 232

Note 17: Fair Values of Assets and Liabilities (continued)
The table below provides quantitative information about the
valuation techniques and significant unobservable inputs used in
the valuation of substantially all of our Level 3 assets and
liabilities measured at fair value on a nonrecurring basis for
which we use an internal model.
We have excluded from the table classes of Level 3 assets
and liabilities measured using an internal model that we
consider, both individually and in the aggregate, insignificant
relative to our overall Level 3 nonrecurring measurements. We
made this determination based upon an evaluation of each class,
which considered the magnitude of the positions, nature of the
unobservable inputs and potential for significant changes in fair
value due to changes in those inputs.
Fair Value Significant Unobservable Weighted
($ in millions) Level 3 Valuation Technique(s) (1) Inputs (1) Range of inputs Average (2)
December 31, 2014
Residential mortgages held
for sale (LOCOM) $ 1,098 (3) Discounted cash flow Default rate (5) 0.9 - 3.8% 2.1%
Discount rate 1.5 - 8.5 3.6
Loss severity 0.0 - 29.8 3.8
Prepayment rate (6) 2.0 - 100.0 65.5
Other assets: private equity Market comparable Comparability
fund investments (4) 171 pricing adjustment 6.0 - 6.0 6.0
Insignificant level 3 assets 294
Total 1,563
December 31, 2013
Residential mortgages held for
sale (LOCOM) $ 893 (3) Discounted cash flow Default rate (5) 1.2 - 4.4 % 2.7 %
Discount rate 4.3 - 12.0 10.9
Loss severity 1.6 - 48.2 5.2
Prepayment rate (6) 2.0 - 100.0 67.2
Other assets: private equity fund Comparability
investments (4) 505 Market comparable pricing adjustment 4.6 - 4.6 4.6
Insignificant level 3 assets 242
Total 1,640
(1) Refer to the narrative following the recurring quantitative Level 3 table of this Note for a definition of the valuation technique(s) and significant unobservable inputs.
(2) For residential MHFS, weighted averages are calculated using outstanding unpaid principal balance of the loans.
(3) Consists of $1.0 billion and $825 million government insured/guaranteed loans purchased from GNMA-guaranteed mortgage securitization, at December 31, 2014 and
2013,respectively and $78 million and $68 million of other mortgage loans that are not government insured/guaranteed at December 31, 2014 and 2013, respectively.
(4) Represents a single investment. For additional information, see the “Alternative Investments” section in this Note.
(5) Applies only to non-government insured/guaranteed loans.
(6) Includes the impact on prepayment rate of expected defaults for the government insured/guaranteed loans, which impacts the frequency and timing of early resolution of
loans.
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