JP Morgan Chase 2013 Annual Report Download - page 292

Notes to consolidated financial statements
298 JPMorgan Chase & Co./2013 Annual Report
The following table summarizes the activities related to
loans sold to U.S. government-sponsored agencies and
third-party-sponsored securitization entities.
Year ended December 31,
(in millions) 2013 2012(e) 2011(e)
Carrying value of loans sold(a) $ 166,028 $ 179,008 $ 149,247
Proceeds received from loan
sales as cash $ 782 $ 195 $ 122
Proceeds from loan sales as
securities(b) 163,373 176,592 146,704
Total proceeds received from
loan sales(c) $ 164,155 $ 176,787 $ 146,826
Gains on loan sales(d) 302 141 133
(a) Predominantly to U.S. government agencies.
(b) Predominantly includes securities from U.S. government agencies that
are generally sold shortly after receipt.
(c) Excludes the value of MSRs retained upon the sale of loans. Gains on
loan sales include the value of MSRs.
(d) The carrying value of the loans accounted for at fair value
approximated the proceeds received upon loan sale.
(e) Prior periods have been revised to conform with the current
presentation.
Options to repurchase delinquent loans
In addition to the Firm’s obligation to repurchase certain
loans due to material breaches of representations and
warranties as discussed in Note 29 on pages 318–324 of
this Annual Report, the Firm also has the option to
repurchase delinquent loans that it services for Ginnie Mae
loan pools, as well as for other U.S. government agencies
under certain arrangements. The Firm typically elects to
repurchase delinquent loans from Ginnie Mae loan pools as
it continues to service them and/or manage the foreclosure
process in accordance with the applicable requirements,
and such loans continue to be insured or guaranteed. When
the Firm’s repurchase option becomes exercisable, such
loans must be reported on the Consolidated Balance Sheets
as a loan with a corresponding liability. As of December 31,
2013 and 2012, the Firm had recorded on its Consolidated
Balance Sheets $14.3 billion and $15.6 billion, respectively,
of loans that either had been repurchased or for which the
Firm had an option to repurchase. Predominantly all of
these amounts relate to loans that have been repurchased
from Ginnie Mae loan pools. Additionally, real estate owned
resulting from voluntary repurchases of loans was $2.0
billion and $1.6 billion as of December 31, 2013 and 2012,
respectively. Substantially all of these loans and real estate
owned are insured or guaranteed by U.S. government
agencies. For additional information, refer to Note 14 on
pages 258–283 of this Annual Report.
JPMorgan Chase’s interest in securitized assets held at
fair value
The following table outlines the key economic assumptions
used to determine the fair value, as of December 31, 2013
and 2012, of certain of the Firm’s retained interests in
nonconsolidated VIEs (other than MSRs), that are valued
using modeling techniques. The table also outlines the
sensitivities of those fair values to immediate 10% and
20% adverse changes in assumptions used to determine
fair value. For a discussion of MSRs, see Note 17 on pages
299–304 of this Annual Report.
Commercial and other
December 31, (in millions, except rates and
where otherwise noted)(a) 2013 2012
JPMorgan Chase interests in securitized
assets(b) $ 520 $ 1,488
Weighted-average life (in years) 5.5 6.1
Weighted-average discount rate(b) 3.8% 4.1%
Impact of 10% adverse change $ (9) $ (34)
Impact of 20% adverse change (18) (65)
(a) The Firm’s interests in prime mortgage securitizations were
$552 million and $341 million, as of December 31, 2013 and 2012,
respectively. These include retained interests in Alt-A loans and re-
securitization transactions. The Firm’s interests in subprime mortgage
securitizations were $91 million and $68 million, as of December 31,
2013 and 2012, respectively.
(b) Incorporates the Firm’s weighted-average loss assumption.
The sensitivity analysis in the preceding table is
hypothetical. Changes in fair value based on a 10% or 20%
variation in assumptions generally cannot be extrapolated
easily, because the relationship of the change in the
assumptions to the change in fair value may not be linear.
Also, in the table, the effect that a change in a particular
assumption may have on the fair value is calculated without
changing any other assumption. In reality, changes in one
factor may result in changes in another, which might
counteract or magnify the sensitivities. The above
sensitivities also do not reflect risk management practices
the Firm may undertake to mitigate such risks.