Annual report pursuant to Section 13 and 15(d)

Securitization of Financial Assets

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Securitization of Financial Assets
 12 Months Ended
Dec. 31, 2023
Transfers and Servicing [Abstract]  
Securitization of Financial Assets Securitization of Financial Assets
The following summarizes certain transactions with securitization trusts:
  As of and for the year ended December 31,
  2023 2022 2021
  (in millions)
Gains on securitizations $ 69  $ 57  $ 68 
Cost of financial assets securitized 559  500  810 
Proceeds from securitizations 628  557  878 
Residual and servicing assets 219  117  210 
Cash received from residual and servicing assets 20  20  18 
In connection with securitization transactions, we typically retain servicing responsibilities and residual assets. We generally receive annual servicing fees that are typically up to 0.25% of the outstanding balance. We may periodically make servicer advances, that are subject to credit risk. Included in securitization assets in our consolidated balance sheets are our servicing assets at amortized cost and our residual assets at fair value. Our residual assets are subordinate to investors’ interests, and their values are subject to credit, prepayment and interest rate risks on the transferred financial assets. Other than our securitization assets representing these residual interests in the trusts’ assets, the investors and the securitization trusts have no recourse to our other assets for failure of debtors to pay when due. In computing gains and losses on securitizations, we use discount rates based on a review of comparable market transactions including Level 3 unobservable inputs which consist of base interest rates and spreads over these base rates. Depending on the nature of the transaction risks, the discount rate ranged from 5.6% to 9.5% during the year ended December 31, 2023.
As of December 31, 2023 and December 31, 2022, our managed assets totaled $12.3 billion and $9.8 billion, respectively, of which $6.1 billion and $5.5 billion, respectively, were securitized assets held in unconsolidated securitization trusts. As of
December 31, 2023 and December 31, 2022, these trusts held $5.6 billion and $5.3 billion, respectively, of notes due to investors. There were no securitization credit losses in the years ended December 31, 2023, 2022, or 2021. As of December 31, 2023, there were no material payments from debtors to the securitization trusts that were greater than 90 days past due.
Receivables from contracts for the installation of energy efficiency and other technologies are the source of cash flows for $108 million of our securitization residual assets. These technologies are installed in facilities owned by, or operated for or by, federal, state or local government entities where the ultimate obligor for the receivable is a governmental entity. The contracts may have guarantees of energy savings from third-party service providers, which typically are entities rated investment grade by an independent rating agency. The remainder of our securitization residual assets are related to contracts where the underlying cash flows are secured by an interest in real estate which are typically senior in terms of repayment to other financings.
In 2023, we recorded an allowance for losses on securitization residual assets related to prepayable assets secured by real estate. While there is no change in the underlying credit quality of the securitized assets, we have revised our estimates of cash flows due to prepayments on certain of these assets. The following table reconciles our beginning and ending allowance for loss on securitization residual assets:
Commercial Government
(in millions)
Beginning balance - December 31, 2021 $ —  $ — 
Provision for loss on securitization asset —  — 
Provision recorded on purchase of a credit deteriorated asset —  — 
Write-off of allowance —  — 
Recovery of allowance —  — 
Ending balance - December 31, 2022 $ —  $ — 
Provision for loss on securitization asset 3  — 
Provision recorded on purchase of a credit deteriorated asset —  — 
Write-off of allowance —  — 
Recovery of allowance —  — 
Ending balance - December 31, 2023 $ 3  $ — 
We recognized a gain of approximately $19 million upon deconsolidation of certain land assets and the debt to which those assets were pledged, which is included in gain on of assets in our income statement. The fair value of our retained interest, which we account for as an equity method investment as described in Note 6, was calculated consistently with how we calculate the value of our securitization residual assets described above.