Wells Fargo 2015 Annual Report Download - page 236

Note 17: Fair Values of Assets and Liabilities (continued)
Table 17.14 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. The table is limited to financial
instruments that had nonrecurring fair value adjustments during
the periods presented.
We have excluded from the table classes of Level 3 assets
and liabilities measured using an internal model that we
Table 17.14: Valuation Techniques – Nonrecurring Basis
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, 2015
Residential mortgages held
for sale (LOCOM) $ 1,047 (3) Discounted cash flow Default rate (4) 0.5 - 5.0% 4.2%
Discount rate 1.5 - 8.5 3.5
Loss severity 0.0 - 26.1 2.9
Prepayment rate (5) 2.6 - 100.0 65.4
Other assets: nonmarketable
equity investments 286 Net asset value Net asset value (6)
Market comparable Comparability
228 pricing adjustment 5.0 - 9.2 8.5
Insignificant level 3 assets 147
Total $ 1,708
December 31, 2014
Residential mortgages held for
sale (LOCOM) $ 1,098 (3) Discounted cash flow Default rate (4) 0.9 - 3.8 % 2.1
%
Discount rate 1.5 - 8.5 3.6
Loss severity 0.0 - 29.8 3.8
Prepayment rate (5) 2.0 - 100.0 65.5
Other assets: nonmarketable Comparability
equity investments 171 Market comparable pricing adjustment 6.0 - 6.0 6.0
Insignificant level 3 assets 294
Total $ 1,563
(1) Refer to the narrative following Table 17.11 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 government insured/guaranteed loans purchased from GNMA-guaranteed mortgage securitization at both December 31, 2015 and 2014, and
$41 million and $78 million of other mortgage loans that are not government insured/guaranteed at December 31, 2015 and 2014, respectively.
(4) Applies only to non-government insured/guaranteed loans.
(5) 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.
(6) The range and weighted average have not been provided since the investments have been recorded at their net asset redemption values.
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