Wells Fargo 2010 Annual Report Download - page 154
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Note 8: Securitizations and Variable Interest Entities (continued)
Securitization Activity Related to Unconsolidated
VIEs
We use VIEs to securitize consumer and CRE loans and other
types of financial assets, including student loans, auto loans and
municipal bonds. We typically retain the servicing rights from
these sales and may continue to hold other beneficial interests in
the VIEs. We may also provide liquidity to investors in the
beneficial interests and credit enhancements in the form of
standby letters of credit. Through these securitizations we may
be exposed to liability under limited amounts of recourse as well
as standard representations and warranties we make to
purchasers and issuers.
We recognized net gains of $27 million from transfers
accounted for as sales of financial assets in securitizations in
2010, and net gains of $1 million in 2009. Additionally, we had
the following cash flows with our securitization trusts that were
involved in transfers accounted for as sales.
Year ended December 31,
2010
2009
Other
Other
Mortgage
financial
Mortgage
financial
(in millions) loans
assets
loans
assets
Sales proceeds from securitizations (1) $ 374,488
-
394,632
-
Servicing fees 4,316
34
4,283
42
Other interests held (2) 1,786
442
3,757
310
Purchases of delinquent assets 25
-
45
-
Net servicing advances 49
-
257
-
(1) Represents cash flow data for all loans securitized in the period presented.
(2) “Other financial assets” for 2009 has been revised to correct previously reported amount.
Sales with continuing involvement during 2010
predominantly related to conforming residential mortgage
securitizations. During 2010 we transferred $379.0 billion in fair
value of conforming residential mortgages to unconsolidated
VIEs and recorded the transfers as sales. These transfers did not
result in a gain or loss because the loans are already carried at
fair value. In connection with these transfers, in 2010 we
recorded a $4.5 billion servicing asset and a $144 million
liability for repurchase reserves, which are both initially
measured at fair value.
We used the following key assumptions to measure mortgage
servicing assets at the date of securitization:
Mortgage servicing rights
2010
2009
Prepayment speed (annual CPR (1)) 13.5
%
13.4
Life (in years) 5.4
5.6
Discount rate 8.0
%
8.3
(1) Constant prepayment rate.
152