JP Morgan Chase 2013 Annual Report Download - page 291

JPMorgan Chase & Co./2013 Annual Report 297
Supplemental information on loan securitizations
The Firm has securitized and sold a variety of loans,
including residential mortgage, credit card, automobile,
student and commercial (primarily related to real estate)
loans, as well as debt securities. The primary purposes of
these securitization transactions were to satisfy investor
demand and to generate liquidity for the Firm.
For loan securitizations in which the Firm is not required to
consolidate the trust, the Firm records the transfer of the
loan receivable to the trust as a sale when the accounting
criteria for a sale are met. Those criteria are: (1) the
transferred financial assets are legally isolated from the
Firm’s creditors; (2) the transferee or beneficial interest
holder can pledge or exchange the transferred financial
assets; and (3) the Firm does not maintain effective control
over the transferred financial assets (e.g., the Firm cannot
repurchase the transferred assets before their maturity and
it does not have the ability to unilaterally cause the holder
to return the transferred assets).
For loan securitizations accounted for as a sale, the Firm
recognizes a gain or loss based on the difference between
the value of proceeds received (including cash, beneficial
interests, or servicing assets received) and the carrying
value of the assets sold. Gains and losses on securitizations
are reported in noninterest revenue.
Securitization activity
The following tables provide information related to the Firm’s securitization activities for the years ended December 31, 2013,
2012 and 2011, related to assets held in JPMorgan Chase-sponsored securitization entities that were not consolidated by the
Firm, and where sale accounting was achieved based on the accounting rules in effect at the time of the securitization.
2013 2012 2011
Year ended December 31,
(in millions, except rates)(a) Residential mortgage(d) Commercial and other(f)(g) Residential mortgage(d)(e) Commercial and other(f)(g) Residential mortgage(d)(e) Commercial and other(f)(g)
Principal securitized $ 1,404 $ 11,318 $ — $ 5,421 $ — $ 5,961
All cash flows during the period:
Proceeds from new securitizations(b) $ 1,410 $ 11,507 $ — $ 5,705 $ — $ 6,142
Servicing fees collected 576 5 662 4 755 4
Purchases of previously transferred financial assets
(or the underlying collateral)(c) 294 — 222 — 772 —
Cash flows received on interests 156 325 185 163 235 178
(a) Excludes re-securitization transactions.
(b) Proceeds from residential mortgage securitizations were received in the form of securities. During 2013, $1.4 billion of residential mortgage
securitizations were classified in level 2 of the fair value hierarchy. Proceeds from commercial mortgage securitizations were received as securities and
cash. During 2013, $11.3 billion of commercial mortgage securitizations were classified in level 2 of the fair value hierarchy, and $207 million of
proceeds from commercial mortgage securitizations were received as cash. During 2012, $5.7 billion of commercial mortgage securitizations were
classified in level 2 of the fair value hierarchy. During 2011, $4.0 billion and $2.1 billion commercial mortgage securitizations were classified in levels 2
and 3 of the fair value hierarchy, respectively.
(c) Includes cash paid by the Firm to reacquire assets from off–balance sheet, nonconsolidated entities – for example, loan repurchases due to representation
and warranties and servicer clean-up calls.
(d) Includes prime, Alt-A, subprime, and option ARMs. Excludes sales for which the Firm did not securitize the loan (including loans sold to Ginnie Mae, Fannie
Mae and Freddie Mac).
(e) There were no residential mortgage securitizations during 2012 and 2011.
(f) Includes commercial and student loan securitizations.
(g) Key assumptions used to measure retained interests originated during the year included weighted-average life (in years) of 8.3, 8.8 and 1.7 for the years
ended December 31, 2013, 2012, and 2011, respectively, and weighted-average discount rate of 3.2%, 3.6% and 3.5% for the years ended December
31, 2013, 2012, and 2011, respectively.
Loans and excess mortgage servicing rights sold to
agencies and other third-party-sponsored securitization
entities
In addition to the amounts reported in the securitization
activity tables above, the Firm, in the normal course of
business, sells originated and purchased mortgage loans
and certain originated excess mortgage servicing rights on
a nonrecourse basis, predominantly to Ginnie Mae, Fannie
Mae and Freddie Mac (the “Agencies”). These loans and
excess mortgage servicing rights are sold primarily for the
purpose of securitization by the Agencies, which also
provide credit enhancement of the loans and excess
mortgage servicing rights through certain guarantee
provisions. The Firm does not consolidate these
securitization vehicles as it is not the primary beneficiary.
For a limited number of loan sales, the Firm is obligated to
share a portion of the credit risk associated with the sold
loans with the purchaser. See Note 29 on pages 318–324 of
this Annual Report for additional information about the
Firm’s loan sales- and securitization-related
indemnifications. See Note 17 on pages 299–304 of this
Annual Report for additional information about the impact
of the Firm’s sale of certain excess mortgage servicing
rights.