Wells Fargo 2015 Annual Report Download - page 190

Note 8: Securitizations and Variable Interest Entities (continued)
warranties for the loans transferred, initially measured at fair
value. In 2014, we recorded a $1.2 billion servicing asset,
securities of $751 million and a $44 million liability. In 2013, we
recorded a $3.5 billion servicing asset and a $143 million
liability.
Table 8.4 presents the key weighted-average assumptions
we used to measure residential mortgage servicing rights at the
date of securitization.
Table 8.4: Residential Mortgage Servicing Rights
Residential mortgage servicing rights
2015 2014 2013
Year ended December 31,
Prepayment speed (1) 12.1% 12.4 11.2
Discount rate 7.3 7.6 7.3
Cost to service ($ per loan) (2) $ 223 259 184
(1) The prepayment speed assumption for residential mortgage servicing rights
includes a blend of prepayment speeds and default rates. Prepayment speed
assumptions are influenced by mortgage interest rate inputs as well as our
estimation of drivers of borrower behavior.
(2) Includes costs to service and unreimbursed foreclosure costs, which can vary
period to period depending on the mix of modified government-guaranteed
loans sold to GNMA.
During 2015, 2014 and 2013, we transferred $17.3 billion,
$10.3 billion and $5.6 billion, respectively, in carrying value of
commercial mortgages to unconsolidated VIEs and third-party
investors and recorded the transfers as sales. These transfers
resulted in gains of $338 million in 2015, $198 million in 2014
and $152 million in 2013, respectively, because the loans were
carried at lower of cost or market value (LOCOM). In connection
with these transfers, in 2015 we recorded a servicing asset of
$180 million, initially measured at fair value using a Level 3
measurement technique, and securities of $241 million,
classified as Level 2. In 2014, we recorded a servicing asset of
$99 million and securities of $100 million. In 2013, we recorded
a servicing asset of $20 million and securities of $54 million.
Retained Interests from Unconsolidated VIEs
Table 8.5 provides key economic assumptions and the sensitivity
of the current fair value of residential mortgage servicing rights
and other interests held to immediate adverse changes in those
assumptions. “Other interests held” relate predominantly to
residential and commercial mortgage loan securitizations.
Residential mortgage-backed securities retained in
securitizations issued through GSEs, such as FNMA, FHLMC
and GNMA, are excluded from the table because these securities
have a remote risk of credit loss due to the GSE guarantee. These
securities also have economic characteristics similar to GSE
mortgage-backed securities that we purchase, which are not
included in the table. Subordinated interests include only those
bonds whose credit rating was below AAA by a major rating
agency at issuance. Senior interests include only those bonds
whose credit rating was AAA by a major rating agency at
issuance. The information presented excludes trading positions
held in inventory.
Wells Fargo & Company
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