Ally Bank 2012 Annual Report Download - page 147

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We consolidated certain of these entities because we had a controlling financial interest in the VIE, primarily due to our servicing
activities, and because we hold a significant variable interest in the VIE. We are generally the primary beneficiary of automobile securitization
entities for which we perform servicing activities and have retained a significant variable interest in the form of a beneficial interest. We were
previously the primary beneficiary of certain mortgage private-label securitization entities.
The consolidated VIEs included in the Consolidated Balance Sheet represent separate entities with which we are involved. The third-
party investors in the obligations of consolidated VIEs have legal recourse only to the assets of the VIEs and do not have such recourse to us,
except for the customary representation and warranty provisions or when we are the counterparty to certain derivative transactions involving
the VIE. In addition, the cash flows from the assets are restricted only to pay such liabilities. Thus, our economic exposure to loss from
outstanding third-party financing related to consolidated VIEs is significantly less than the carrying value of the consolidated VIE assets. All
assets of consolidated VIEs, presented below based upon the legal transfer of the underlying assets in order to reflect legal ownership, are
restricted for the benefit of the beneficial interest holders. Refer to Note 25 for discussion of the assets and liabilities for which the fair value
option has been elected.
December 31, ($ in millions) 2012 2011
Assets
Loans held-for-sale, net $ — $ 9
Finance receivables and loans, net
Consumer 13,671 21,622
Commercial 17,839 19,313
Allowance for loan losses (144) (210)
Total finance receivables and loans, net 31,366 40,725
Investment in operating leases, net 6,060 4,389
Other assets 2,868 3,029
Assets of operations held-for-sale 12,139 —
Total assets $ 52,433 $ 48,152
Liabilities
Short-term borrowings $ 400 $ 795
Long-term debt 26,461 33,143
Interest payable 114
Accrued expenses and other liabilities 16 405
Liabilities of operations held-for-sale 9,686 —
Total liabilities $ 36,564 $ 34,357
Off-balance Sheet Variable Interest Entities
The nature, purpose, and activities of nonconsolidated securitization entities are similar to those of our consolidated securitization
entities with the primary difference being the nature and extent of our continuing involvement. The cash flows from the assets of
nonconsolidated securitization entities generally are the sole source of payment on the securitization entities’ liabilities. The creditors of these
securitization entities have no recourse to us with the exception of market customary representation and warranty provisions as described in
Note 29.
Nonconsolidated VIEs include entities for which we either do not hold potentially significant variable interests or do not provide
servicing or asset management functions for the financial assets held by the securitization entity. Additionally, to qualify for off-balance sheet
treatment, transfers of financial assets must meet the sale accounting conditions in ASC 860, Transfers and Servicing. Previously, our
residential mortgage loan securitizations consisted of Ginnie Mae and private-label securitizations. We are not the primary beneficiary of any
GSE loan securitization transaction because we do not have the power to direct the significant activities of such entities. Previously, we did
not consolidate certain private-label mortgage securitizations because we did not have a variable interest that could potentially have been
significant or we did not have power to direct the activities that most significantly impacted the performance of the VIE.
For nonconsolidated securitization entities, the transferred financial assets are removed from our balance sheet provided the conditions
for sale accounting are met. The financial assets obtained from the securitization are primarily reported as cash, servicing rights, or retained
interests (if applicable). Typically, we conclude that the fee we are paid for servicing consumer automobile finance receivables represents
adequate compensation, and consequently, we do not recognize a servicing asset or liability. As an accounting policy election, we elected fair
value treatment for our mortgage servicing rights (MSR) portfolio. Liabilities incurred as part of these securitization transactions, such as
representation and warranty provisions, are recorded at fair value at the time of sale and are reported as accrued expenses and other liabilities
on our Consolidated Balance Sheet. Upon the sale of the loans, we recognize a gain or loss on sale for the difference between the assets
recognized, the assets derecognized, and the liabilities recognized as part of the transaction.
Table of Contents
Notes to Consolidated Financial Statements
Ally Financial Inc. • Form 10-K