Navy Federal Credit Union 2014 Annual Report Download - page 44

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Navy Federal Credit Union26
Mortgage Association (GNMA). During the years ended December 31, 2014 and 2013, Navy Federal
received $79.3 million and $71.8 million, respectively, of mortgage loan servicing fees. During the years
ended December 31, 2014 and 2013, Navy Federal received $1.2 million and $1.4 million, respectively, of
late charge and miscellaneous fees.
Retained investment in GNMA Securities: GNMA securities backed by Navy Federal loans may be
retained as investments by Navy Federal and classified as AFS securities. AFS investments are carried
at fair value with changes in fair value recognized as AOCI. See Note 3 for details. Navy Federal uses
a third party to value its GNMA securities with a single cash flow stream model and market prices
of similar assets.
In accordance with ASC 860-20, Secured Borrowing and Collateral, the eect of two negative changes
in each of the key assumptions used to determine the fair value of Navy Federal’s investment in GNMA
securities must be disclosed. The negative eect of each key assumption change must be calculated
independently, holding all other assumptions constant. The first table below details the key assumptions
used in Navy Federal’s analysis—specifically, constant prepayment rate (CPR), anticipated credit losses
and weighted-average life. The second table below details the potential impacts of a 10 percent and a
20 percent adverse change to the CPR on the fair value of the securities.
GNMA Mortgages
2014 2013
Weighted-average constant prepayment rate (CPR)(1) 8.8% 7.8%
Anticipated credit losses(2) 0 0
Weighted-average life 5.38 years 5.96 years
(1)CPR is based on the average of the CPR for all GNMA securities.
(2)GNMA securities are collateralized by government-insured loans and there is no anticipation of significant credit losses.
GNMA Mortgages
(dollars in thousands) 2014 2013
Constant prepayment rate
Adverse fair value change of 10% $ 1,928 $ 1,687
Adverse fair value change of 20% 3,739 3,528
The sensitivities in the table above are hypothetical and may not be indicative of actual results. The
eect of a variation in a particular assumption on the fair value is calculated independently of changes in
other assumptions. Further, changes in fair value based on variations in assumptions generally cannot be
extrapolated because the relationship of the change in assumption on the fair value may not be linear.