Regions Bank 2012 Annual Report Download - page 219

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FAIR VALUE OPTION
Regions elected the fair value option for FNMA and FHLMC eligible thirty-year residential mortgage loans
held for sale originated on or after January 1, 2008. Additionally, Regions elected the fair value option for
FNMA and FHLMC eligible fifteen-year residential mortgage loans held for sale originated on or after
November 22, 2010. These elections allow for a more effective offset of the changes in fair values of the loans
and the derivative instruments used to economically hedge them without the burden of complying with the
requirements for hedge accounting. Regions has not elected the fair value option for other loans held for sale
primarily because they are not economically hedged using derivative instruments. Fair values of mortgage loans
held for sale are based on traded market prices of similar assets where available and/or discounted cash flows at
market interest rates, adjusted for securitization activities that include servicing values and market conditions,
and were recorded in loans held for sale in the consolidated balance sheets.
The following table summarizes the difference between the aggregate fair value and the aggregate unpaid
principal balance for mortgage loans held for sale measured at fair value:
December 31, 2012 December 31, 2011
Aggregate
Fair Value
Aggregate
Unpaid
Principal
Aggregate Fair
Value Less
Aggregate
Unpaid
Principal
Aggregate
Fair Value
Aggregate
Unpaid
Principal
Aggregate Fair
Value Less
Aggregate
Unpaid
Principal
(In millions)
Mortgage loans held for sale, at fair
value ....................... $1,282 $1,235 $47 $844 $815 $29
Interest income on mortgage loans held for sale is recognized based on contractual rates and is reflected in
interest income on loans held for sale in the consolidated statements of operations. The following table details net
gains (losses) resulting from changes in fair value of these loans which were recorded in mortgage income in the
consolidated statements of operations. These changes in fair value are mostly offset by economic hedging
activities. An immaterial portion of these amounts was attributable to changes in instrument-specific credit risk.
Mortgage loans held for sale, at fair value
Year Ended December 31
2012 2011
(In millions)
Net gains resulting from changes in fair
value ............................. $18 $36
203