Bank of America 2010 Annual Report Download - page 184

Other Asset-backed Securitizations
Other asset-backed securitizations include resecuritization trusts, municipal bond trusts, and automobile and other securitization trusts. The table below
summarizes select information related to other asset-backed securitizations in which the Corporation held a variable interest at December 31, 2010 and 2009.
(Dollars in millions) 2010 2009 2010 2009 2010 2009
December 31 December 31 December 31
Resecuritization
Trusts
Municipal Bond
Trusts
Automobile and
Other
Securitization Trusts
Unconsolidated VIEs
Maximum loss exposure
$21,425 $543 $4,261 $10,143 $141 $2,511
On-balance sheet assets
Senior securities held
(1, 2)
:
Trading account assets
$2,324 $543 $255 $155 $– $–
AFS debt securities
17,989 – – – 109 2,212
Subordinate securities held
(1, 2)
:
Trading account assets
2 – – – – –
AFS debt securities
1,036 – – – – 195
Residual interests held
(3)
74 – – 203 – 83
All other assets
– – – – 17 5
Total retained positions $21,425 $543 $255 $358 $126 $2,495
Total assets of VIEs
$55,006 $7,443 $6,108 $12,247 $774 $3,636
Consolidated VIEs
Maximum loss exposure
$– $– $4,716 $241 $2,061 $908
On-balance sheet assets
Trading account assets
$68 $– $4,716 $241 $– $–
Loans and leases
– – – – 9,583 8,292
Allowance for loan and lease losses
– – – – (29) (101)
All other assets
– – – – 196 25
Total assets $68 $– $4,716 $241 $9,750 $8,216
On-balance sheet liabilities
Commercial paper and other short-term borrowings
$– $– $4,921 $– $– $–
Long-term debt
68 – – – 7,681 7,308
All other liabilities
– – – 2 101 –
Total liabilities $68 $– $4,921 $2 $7,782 $7,308
(1)
As a holder of these securities, the Corporation receives scheduled principal and interest payments. During 2010 and 2009, there were no significant OTTI losses recorded on those securities classified as AFS debt securities.
(2)
The retained senior and subordinate securities were valued using quoted market prices or observable market inputs (Level 2 of the fair value hierarchy).
(3)
The retained residual interests are carried at fair value which was derived using model valuations (Level 3 of the fair value hierarchy).
Resecuritization Trusts
The Corporation transfers existing securities, typically MBS, into resecuritiza-
tion vehicles at the request of customers seeking securities with specific
characteristics. The Corporation may also enter into resecuritizations of
securities within its investment portfolio for purposes of improving liquidity
and capital, and managing credit or interest rate risk. Generally, there are no
significant ongoing activities performed in a resecuritization trust and no
single investor has the unilateral ability to liquidate the trust.
During 2010, the Corporation resecuritized $97.7 billion of MBS, including
$71.3 billion of securities purchased from third parties compared to $49.2 bil-
lion in 2009. Net losses upon sale totaled $144 million during 2010 com-
pared to net gains of $213 million in 2009. The Corporation consolidates a
resecuritization trust if it has sole discretion over the design of the trust,
including the identification of securities to be transferred in and the structure
of securities to be issued, and also retains a variable interest that could
potentially be significant to the trust. If one or a limited number of third-party
investors share responsibility for the design of the trust and purchase a
significant portion of subordinate securities, the Corporation does not con-
solidate the trust. Prior to 2010, these resecuritization trusts were typically
QSPEs and as such were not subject to consolidation by the Corporation.
Municipal Bond Trusts
The Corporation administers municipal bond trusts that hold highly rated,
long-term, fixed-rate municipal bonds. The vast majority of the bonds are rated
AAA or AA and some of the bonds benefit from insurance provided by mono-
lines. The trusts obtain financing by issuing floating-rate trust certificates that
reprice on a weekly or other basis to third-party investors. The Corporation may
serve as remarketing agent and/or liquidity provider for the trusts. The
floating-rate investors have the right to tender the certificates at specified
dates, often with as little as seven days’ notice. Should the Corporation be
unable to remarket the tendered certificates, it is generally obligated to
purchase them at par under standby liquidity facilities unless the bond’s
credit rating has declined below investment-grade or there has been an event
of default or bankruptcy of the issuer and insurer.
182 Bank of America 2010