v3.25.1
Non-consolidated variable interest entities
 3 Months Ended
Mar. 31, 2025
Variable Interest Entity  
Variable interest entity disclosure
Note 21 – Non-consolidated variable interest entities
 
 
 
The Corporation is involved with
two
 
statutory trusts which it created to issue trust preferred securities
 
to the public. These trusts are
deemed to
 
be variable
 
interest entities
 
(“VIEs”) since
 
the equity
 
investors
 
at risk
 
have no
 
substantial
 
decision-making
 
rights. The
Corporation does
 
not hold
 
any variable
 
interest in
 
the trusts,
 
and therefore,
 
cannot be
 
the trusts’
 
primary beneficiary.
 
Furthermore,
the
 
Corporation
 
concluded
 
that
 
it
 
did
 
not
 
hold
 
a
 
controlling
 
financial
 
interest
 
in
 
these
 
trusts
 
since
 
the
 
decisions
 
of
 
the
 
trusts
 
are
predetermined through
 
the trust
 
documents and
 
the guarantee
 
of the
 
trust preferred
 
securities is
 
irrelevant since
 
in substance
 
the
sponsor is guaranteeing its own debt.
Also,
 
the Corporation
 
is involved
 
with various
 
special
 
purpose entities
 
mainly in
 
guaranteed mortgage
 
securitization
 
transactions,
including
 
GNMA
 
and
 
FNMA.
The
 
Corporation
 
has
 
also
 
engaged
 
in
 
securitization
 
transactions
 
with
 
FHLMC,
 
but
 
considers
 
its
exposure
 
in
 
the
 
form
 
of
 
servicing
 
fees
 
and
 
servicing
 
advances
 
not
 
to
 
be
 
significant
at
 
March
 
31,
 
2025
.
These
 
special
 
purpose
entities
 
are
 
deemed
 
to
 
be
 
VIEs
 
since
 
they
 
lack
 
equity
 
investments
 
at
 
risk.
 
The
 
Corporation’s
 
continuing
 
involvement
 
in
 
these
guaranteed loan
 
securitizations includes
 
owning certain
 
beneficial interests
 
in the
 
form of
 
securities as
 
well as
 
the servicing
 
rights
retained. The Corporation is
 
not required to provide additional
 
financial support to any
 
of the variable interest entities
 
to which it has
transferred
 
the
 
financial
 
assets.
 
The
 
mortgage-backed
 
securities,
 
to
 
the
 
extent
 
retained,
 
are
 
classified
 
in
 
the
 
Corporation’s
Consolidated
 
Statements
 
of
 
Financial
 
Condition
 
as
 
available-for-sale
 
or
 
trading
 
securities.
 
The
 
Corporation
 
concluded
 
that,
essentially,
 
these
 
entities
 
(FNMA
 
and
 
GNMA)
 
control
 
the
 
design
 
of
 
their
 
respective
 
VIEs,
 
dictate
 
the
 
quality
 
and
 
nature
 
of
 
the
collateral, require
 
the underlying
 
insurance, set
 
the servicing
 
standards via
 
the servicing
 
guides and
 
can change
 
them at
 
will, and
can remove a
 
primary servicer
 
with cause, and
 
without cause
 
in the case
 
of FNMA. Moreover,
 
through their guarantee
 
obligations,
agencies (FNMA and GNMA) have the obligation to absorb losses that could be potentially significant to the VIE.
The
 
Corporation
 
holds
 
variable
 
interests
 
in
 
these
 
VIEs
 
in
 
the
 
form
 
of
 
agency
 
mortgage-backed
 
securities
 
and
 
collateralized
mortgage obligations, including those securities originated by the
 
Corporation and those acquired from third parties. Additionally,
 
the
Corporation holds agency
 
mortgage-backed securities
 
and agency collateralized
 
mortgage obligations issued
 
by third party
 
VIEs in
which
 
it
 
has
 
no
 
other
 
form
 
of
 
continuing
 
involvement.
 
Refer
 
to
 
Note
 
23
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
for
 
additional
information on the debt
 
securities outstanding at March
 
31, 2025 and December
 
31, 2024, which are
 
classified as available-for-sale
and
 
trading
 
securities
 
in
 
the
 
Corporation’s
 
Consolidated
 
Statements
 
of
 
Financial
 
Condition.
 
In
 
addition,
 
the
 
Corporation
 
holds
variable
 
interests
 
in
 
the
 
form
 
of
 
servicing
 
fees,
 
since
 
it
 
retains
 
the
 
right
 
to
 
service
 
the
 
transferred
 
loans
 
in
 
those
 
government-
sponsored special purpose entities (“SPEs”)
 
and may also purchase the right
 
to service loans in other government-sponsored
 
SPEs
that were transferred to those SPEs by a third-party.
 
The following
 
table presents
 
the carrying
 
amount and
 
classification of
 
the assets
 
related to
 
the Corporation’s
 
variable interests
 
in
non-consolidated VIEs
 
and the
 
maximum exposure
 
to loss
 
as a
 
result of
 
the Corporation’s
 
involvement as
 
servicer of
 
GNMA and
FNMA loans at March 31, 2025 and December 31, 2024.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
March 31, 2025
December 31, 2024
Assets
Servicing assets:
Mortgage servicing rights
$
81,620
$
84,356
Total servicing assets
 
$
81,620
$
84,356
Other assets:
Servicing advances
$
6,188
$
6,112
Total other assets
$
6,188
$
6,112
Total assets
$
87,808
$
90,468
Maximum exposure to loss
$
87,808
$
90,468
The size
 
of the
 
non-consolidated VIEs,
 
in which
 
the Corporation
 
has a
 
variable interest
 
in the
 
form of
 
servicing fees,
 
measured as
the total unpaid principal balance of the loans, amounted to $
6.4
 
billion at March 31, 2025 (December 31, 2024 - $
6.6
 
billion).
The Corporation
 
determined that
 
the maximum
 
exposure to
 
loss includes
 
the fair
 
value of
 
the MSRs
 
and the
 
assumption that
 
the
servicing advances
 
at March 31,
 
2025 and December
 
31, 2024, will
 
not be recovered.
 
The agency
 
debt securities are
 
not included
as part of the maximum exposure to loss since they are guaranteed by the related agencies.
ASU 2009-17 requires that an ongoing primary beneficiary
 
assessment should be made to determine whether the
 
Corporation is the
primary beneficiary of any of
 
the VIEs it is involved
 
with. The conclusion on the
 
assessment of these non-consolidated
 
VIEs has not
changed
 
since
 
their
 
initial
 
evaluation.
 
The
 
Corporation
 
concluded
 
that
 
it
 
is
 
still
 
not
 
the
 
primary
 
beneficiary
 
of
 
these
 
VIEs,
 
and
therefore, these VIEs are not required to be consolidated in the Corporation’s financial statements at March
 
31, 2025.