Navy Federal Credit Union 2015 Annual Report Download - page 45

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Navy Federal Credit Union26
Accretable Yield
(dollars in thousands) 2015 2014
Balance, beginning of period $ 17,444 $ 19,493
Accretion (3,000) (3,049)
Net reclassification(1) 1,433 2,359
Removals (43) (1,359)
Balance, end of period $ 15,834 $ 17,444
(1)Includes transfers between accretable yield and non-accretable yield.
NOTE 6: LOAN SALES AND CONTINUING INVOLVEMENT
IN ASSETS TRANSFERRED
In the normal course of business, Navy Federal originates and transfers qualifying residential
mortgage loans in securitization or sales transactions in which we have continuing involvement.
Loans are sold to Federal National Mortgage Association (FNMA) and Federal Home Loan
Mortgage Corporation (FHLMC), who generally securitize the loans into mortgage-backed
securities that are sold to third-party investors in the secondary market or retained by Navy Federal
for investment purposes. Navy Federal, as an authorized Government National Mortgage
Association (GNMA) issuer/servicer, pools qualifying Federal Housing Administration (FHA)
and Department of Veterans Aairs (VA) insured loans into mortgage-backed securities that
are either sold to third-party investors in the secondary market or retained by Navy Federal for
investment purposes. From time to time, Navy Federal may also sell loans that were previously
retained for investment to private third-party investors.
Navy Federal originated $12.3 billion and $8.0 billion, and sold/securitized $5.0 billion and $2.7
billion, of first mortgage loans during the years ended December 31, 2015 and 2014, respectively.
During the year ended December 31, 2015, Navy Federal reclassified $35.9 million of mortgage
loans from held for investment to MLAS. The loans were transferred to MLAS at fair value and
were subsequently measured at fair value until the loans were sold as part of a whole loan sale to
private investors for cash proceeds of $36.2 million and an MSR of $0.3 million. During the year
ended December 31, 2014, Navy Federal reclassified $43.8 million of mortgage loans from held
for investment to MLAS. The loans were transferred to MLAS at fair value and were subsequently
measured at fair value until the loans were sold as part of a whole loan sale to private investors
for cash proceeds of $44.0 million and an MSR of $0.4 million.
Gains and losses on the sale of MLAS are classified in the Consolidated Statements of Income as
Net gains on mortgage loan sales and totaled $173.0 million and $87.5 million for the years ended
December 31, 2015 and 2014, respectively. Navy Federal recorded $9.7 million and $11.4 million of
changes in MLAS fair value for the years ended December 31, 2015 and 2014, respectively, which
are classified as Net gains on mortgage loan sales in the Consolidated Statements of Income.
Navy Federal’s continuing involvement in loans transferred includes ongoing servicing,
repurchasing previously transferred loans under certain conditions, loss share agreements,
holding of mortgage-backed securities issued by securitization and obligations related to
standard representations and warranties. Navy Federal may also incur incremental obligations
related to various forms of credit enhancements aorded to third-party investors for securities
partially backed by the transferred loans.