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Fair Value Of Financial Instruments | 12 Months Ended
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Dec. 31, 2014
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Fair Value Measurement | Note 7: Fair Value of Financial Instruments Fair Value Measurement Fair value is a market-based measure ment considered from the perspective of a market participant. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those which it believes market participants would use in pricing an asset or liability at the measurement date. The fair value measurement of financial instruments held or issued by the Company are determined through the use of observable market data when avail able. Market data is obtained from a variety of third-party sources, including dealer quotes. If dealer quotes are not available for an instrument that is infrequently traded, the Company uses alternate valuation methods, including either dealer quotes for similar instruments or modeling using market data inputs. The use of alternate valuation methods generally requires considerable judgment in the application of estimates and assumptions and changes to such estimates and assumptions may produce materially different fair values. The accounting guidance for fair value measurement establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most ob servable inputs be used when available and reliable. Observable inputs are those the Company believes that market participants would use in pricing an asset or liability based on available market data. Unobservable inputs are those that reflect the Company’s beliefs about the assumptions market participants would use in pricing an asset or liability based on available information. The fair value hierarchy is categorized into three levels based on the observability and reliability of inputs, as follows: Leve l 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company can access. Valuations are based on quoted prices that are readily and regularly available in an active market, with significant trading volumes. Level 2—Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Level 2 assets include debt securities with quoted prices that are traded less frequently than excha nge-traded instruments, securities which are priced using observable inputs and derivative contracts whose values are determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by obser vable market data. Level 3—Valuations based on inputs that are unobservable and supported by little or no market activity and that are significant to the overall fair value measurement. Level 3 assets and liabilities include financial instruments whose va lue is determined using pricing models, discounted cash flow methodologies, or similar techniques where significant inputs are unobservable, as well as instruments for which the determination of fair value requires significant management judgment or estima tion. The availability of observable inputs can vary from financial instrument to financial instrument and period to period and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new and not yet e stablished in the marketplace, and other characteristics particular to the product. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the Company assigns the level in the fair value hierarchy for which the fair value measurement in its entirety falls, based on the least observable input that is significant to the fair value measurement. Financial Assets (excluding derivative assets) Financial assets, excluding derivative assets, held by the Company primarily consist of investments in debt securities. Substantially all of the Company’s investments are priced by independent third parties, including pricing services and brokers. Typically, the Company receives one pricing service v alue or broker quote for each instrument, which represents a non-binding indication of value. The Company reviews the assumptions, inputs and methodologies used by pricing services and brokers to obtain reasonable assurance that the prices used in its valu ations reflect fair value. When the Company believes a third-party quotation differs significantly from its internally developed expectation of fair value, whether higher or lower, the Company reviews its data or assumptions with the provider. This review includes comparing significant assumptions such as prepayment speeds, default ratios, forward yield curves, credit spreads and other significant quantitative inputs to internal assumptions, and working with the price provider to reconcile the differences. The price provider may subsequently provide an updated price. In the event that the price provider does not update its price, and the Company still does not agree with the price provided, the Company will obtain a price from another third-party provider o r use an internally developed price which it believes represents the fair value of the investment. The fair values of investments for which internal prices were used were not significant to the aggregate fair value of the Company’s investment portfolio as of December 31, 2014 or 2013. All challenges to third-party prices are reviewed by staff of the Company with relevant expertise to ensure reasonableness of assumptions. Financial Liabilities (excluding derivative liabilities) Financial liabilities, e xcluding derivative liabilities, issued by the Company primarily consist of investment agreements, MTNs and debt issued for general corporate purposes within its corporate segment, debt in VIEs and warrants. Investment agreements, MTNs, and corporate debt are typically recorded at face value adjusted for premiums or discounts. The majority of the financial liabilities that the Company has elected to fair value or that require fair value reporting or disclosures are valued based on the estimated value of the underlying collateral, the Company’s or a third-party’s estimate of discounted cash flow model estimates, or quoted market values for similar products. These valuations include adjustments for expected nonperformance risk of the Company. Derivative Liabil ities The Company’s derivative liabilities are primarily insured credit derivatives that reference structured pools of cash securities and CDSs. The Company generally insured the most senior liabilities of such transactions, and at the inception of transac tions its exposure generally had more subordination than needed to achieve triple-A ratings from credit rating agencies. The types of collateral underlying its insured derivatives consist of cash securities and CDSs referencing primarily corporate obligati ons, ABS, RMBS, CMBS, CRE loans, and CDOs. The Company’s insured credit derivative contracts are non-traded structured credit derivative transactions. Since insured derivatives are highly customized and there is generally no observable market for these derivatives, the Company estimates their fair values in a hypothetical market based on internal and third-party models simulating what a similar company would charge to assume the Company’s position in the transaction at the measurement date. This pricing would be based on the expected loss of the exposure. The Company reviews its valuation model results on a quarterly basis to assess the appropriateness of the assumptions and results in light of current market activity and conditions. This review is perfor med by internal staff with relevant expertise. If live market spreads or securities prices are observable for similar transactions, those spreads are an integral part of the analysis. New insured transactions that resemble existing (previously insured) tra nsactions, if any, would be considered, as well as negotiated settlements of existing transactions. The Company may from time to time make changes in its valuation techniques if the change results in a measurement that it believes is equally or more repres entative of fair value under current circumstances. Internal Review Process All significant financial assets and liabilities are reviewed by committees created by the Company to ensure compliance with the Company’s policies and risk procedures in the development of fair values of financial assets and liabilities. These valuation committees review, among other things, key assumptions used for internally developed prices, significant changes in sources and uses of inputs, including changes in model appro aches, and any adjustments from third-party inputs or prices to internally developed inputs or prices. The committees also review any significant impairment or improvements in fair values of the financial instruments from prior periods. From time to time, these committees will consult with the Company’s valuation experts to better understand key methods and assumptions used for the determination of fair value, including understanding significant changes in fair values. These committees are comprised of seni or finance team members with the relevant experience in the financial instruments their committee is responsible for. For each quarter, these committees document their agreement with the fair values developed by management of the Company as reported in the quarterly and annual financial statements. Valuation Techniques Valuation techniques for financial instruments measured at fair value or disclosed at fair value are described below. Fixed-Maturity Securities (including short-term investments) Held as Avai lable-For-Sale, Investments Carried at Fair Value, Investments Pledged as Collateral, Investments Held-to-Maturity, and Other Investments These investments include investments in U.S. Treasury and government agencies, state and municipal bonds, foreign gov ernments, corporate obligations, MBS, ABS, money market securities, and perpetual debt and equity securities. These investments are generally valued based on recently executed transaction prices or quoted market prices. When quoted market prices are not available, fair value is generally determined using quoted prices of similar investments or a valuation model based on observable and unobservable inputs. Inputs vary depending on the type of investment. Observable inputs include contractual cash flows, i nterest rate yield curves, CDS spreads, prepayment and volatility scores, diversity scores, cross-currency basis index spreads, and credit spreads for structures similar to the financial instrument in terms of issuer, maturity and seniority. Unobservable i nputs include cash flow projections and the value of any credit enhancement. The fair value of the HTM investments is determined using discounted cash flow models. Key inputs include unobservable cash flows projected over the expected term of the investmen t discounted using observable interest rate yield curves of similar securities. Investments based on quoted market prices of identical investments in active markets are classified as Level 1 of the fair value hierarchy. Level 1 investments generally consis t of U.S. Treasury and government agency, foreign government and money market investments. Quoted market prices of investments in less active markets, as well as investments which are valued based on other than quoted prices for which the inputs are observ able, such as interest rate yield curves, are categorized in Level 2 of the fair value hierarchy. Investments that contain significant inputs that are not observable are categorized as Level 3. Cash and Cash Equivalents, Receivable for Investments Sold, Net Cash Collateral Pledged to Swap Counterparties, Payable for Investments Purchased, Payable for Loans Purchased and Accrued Investment Income The carrying amounts of cash and cash equivalents, receivable for investments sold, net cash collateral pledged to swap counterparties, payable for investments purchased, payable for loans purchased, and accrued investment income approximate fair values due to the short-term nature and credit worthiness of these instruments. These items are c ategorized in Level 1 or Level 2 of the fair value hierarchy. Loans Receivable at Fair Value Loans receivable at fair value are comprised of loans held by consolidated VIEs consisting of corporate and residential mortgage loans. Fair values of commercial loans are obtained from a pricing service and determined using actively quoted prices obtained from multiple market participants. Fair values of residential mortgage loans are determined using quoted prices for MBS issued by the respective VIE and adjustm ents for the fair values of the financial guarantees provided by MBIA Corp. on the related MBS. Loans receivable at fair value are categorized in Level 2 or Level 3 of the fair value hierarchy based on the input that is significant to the fair value measur ement in its entirety. Loan Repurchase Commitments Loan repurchase commitments are obligations owed by the sellers/servicers of mortgage loans to either MBIA as reimbursement of paid claims or to the RMBS trusts as defined in the transaction documents. Loa n repurchase commitments are assets of the consolidated VIEs. This asset represents the rights of MBIA against the sellers/servicers for breaches of representations and warranties that the securitized residential mortgage loans sold to the trust to comply with stated underwriting guidelines and for the sellers/servicers to cure, replace, or repurchase mortgage loans. Fair value measurements of loan repurchase commitments represent the amounts owed by the sellers/servicers to MBIA as reimbursement of paid cl aims. Loan repurchase commitments are not securities and no quoted prices or comparable market transaction information are observable or available. Loan repurchase commitments at fair value are categorized in Level 3 of the fair value hierarchy. Fair value s of loan repurchase commitments are determined using discounted cash flow techniques based on inputs including: • breach rates representing the rate at which the sellers/servicers failed to comply with stated representations and warranties; • recovery rates representing the estimates of future cash flows for the asset, including estimates about possible variations in the amount of cash flows expected to be collected; • expectations about possible variations in the timing of collections of the cash flow s; and • time value of money, represented by the rate on risk-free monetary assets. Investment Agreements The fair values of investment agreements are determined using discounted cash flow techniques based on contractual cash flows and observable interest rates currently being offered for similar agreements with comparable maturity dates. Investment agreements contain collatera lization and termination agreements that substantially mitigate the nonperformance risk of the Company. As the terms of the notes are private, and the timing and amount of contractual cash flows are not observable, these investment agreements are categoriz ed as Level 3 of the fair value hierarchy. Medium-Term Notes The fair values of certain MTNs are based on quoted market prices provided by third-party sources, where available. When quoted market prices are not available, the Company applies a matrix prici ng grid based on the quoted market prices received and the MTNs’ stated maturity and interest rate to determine fair value. Nonperformance risk is included in the quoted market prices and the matrix pricing grid. The Company has elected to record these MTN s at fair value as they contain embedded derivatives which cannot accurately be separated from the host debt instrument and fair valued separately, therefore, these MTNs are carried at fair value with changes in fair value reflected in earnings. The remain ing MTNs, which are not carried at fair value, do not contain embedded derivatives. As these MTNs are illiquid and the prices reflect significant unobservable inputs, they are categorized as Level 3 of the fair value hierarchy. Long-term Debt Long-term deb t consists of notes, debentures, surplus notes and accrued interest on this debt. The fair value of long-term notes, debentures and surplus notes are estimated based on quoted prices for the identical or similar securities. The fair value of the accrued in terest expense on the surplus notes due in 2033 is determined based on the scheduled interest payments discounted by the market’s perception of the credit risk related to the repayment of the surplus notes. The credit risk related to the repayment of the s urplus notes is based on recent trades of the surplus notes. The deferred interest payment will be due on the first business day on or after which the Company obtains approval to make such payment. The carrying amounts of accrued interest expense on all o ther long-term debt approximate fair value due to the short-term nature of these instruments. Long-term debt is categorized as Level 2 of the fair value hierarchy. Variable Interest Entity Notes The fair values of VIE notes are determined based on recently executed transaction prices or quoted prices where observable. When position-specific quoted prices are not observable, fair values are based on quoted prices of similar securities. Fair values based on quoted prices of similar securities may be adjusted for factors unique to the securities, including any credit enhancement. When observable quoted prices are not available, fair value is determined based on discounted cash flow techniques of the underlying collateral using observable and unobservable inputs. Observable inputs include interest rate yield curves and bond spreads of similar securities. Unobservable inputs include the value of any credit enhancement. VIE notes are categorized in Level 2 or Level 3 of the fair value hierarchy based on the lowest level input that is significant to the fair value measurement in its entirety. Variable Interest Entity Derivatives The VIEs have entered into derivative transactions consisting of cross currency swaps and interest rate caps. Fair values of OTC derivatives are determined using valuation models based on observable and/or unobservable inputs. These observable and market-based inputs include interest rates and volatilities. These derivatives are categorized in Level 2 or Level 3 of the fair value hierarchy bas ed on the input that is significant to the fair value measurement in its entirety. Derivatives The corporate segment has entered into derivative transactions primarily consisting of interest rate swaps. Fair values of OTC derivatives are determined using valuation models based on observable inputs, nonperformance risk of the Company’s own credit and nonperformance risk of the counterparties. Observable and market-based inputs include interest rate yields, credit spreads and volatilities. These derivatives are categorized in Level 2 or Level 3 of the fair value hierarchy based on the lowest level input that is significant to the fair value measurement in its entirety. The Company has policies and procedures in place regarding counterparties, including review and approval of the counterparty and the Company’s exposure limit, collateral posting requirements, collateral monitoring and margin calls on collateral. The Company manages counterparty credit risk on an individual counterparty basis through master netti ng a greements covering derivative transactions in the corporate segment as of December 31, 2014. These agreements allow the Company to contractually net amounts due from a counterparty with those amounts due to such counterparty when certain triggering events occur. The Company only executes swaps under master netting agreements, which typically contain mutual credit downgrade provisions that generally provide the ability to require ass ignment or termination in the event either the Company or the counterparty is downgraded below a specified credit rating. The netting agreements minimize the potential for losses related to credit exposure and thus serve to mitigate the Company’s nonperfor mance risk under these derivatives. In certain cases, the Company also manages credit risk through collateral agreements that give the Company the right to hold or the obligation to provide collateral when the current market value of derivative contracts e xceeds an exposure threshold. Under these a gree ments, the Company may provide U.S. Treasury and other highly rated securities or cash to secure the derivative. The delivery of high-quality collateral can minimize credit exposure and mitigate the potential for nonperformance risk impacting the fair values of the derivatives. Derivatives—Insurance The derivative contracts insured by the Company cannot be legally traded and generally do not have observable market prices. The Company determines the fair values of insured credit derivatives using valuation models. The valuation models are consistently applied from period to period, with refinements to the fair value estimation approach being applied as and when the information becomes available. Negotiated settle ments are also considered when determining fair value to validate the fair value estimates determined by the valuation models and to determine the best available estimate of fair value from the perspective of a market participant. Approximately 93% of the balance sheet fair value of insured credit derivatives as of December 31, 2014 was valued based on the Binomial Expansion Technique (“BET”) Model. Approximately 7% of the balance sheet fair value of insured credit derivatives as of December 31, 2014 was valued based on the internally developed Direct Price Model and the Dual Default m odel. The valuation of insured derivatives includes the impact of its credit standing. All of these derivatives are categorized as Level 3 of the fair value hierarchy as their fair value is derived using significant unobservable inputs. The Company has als o entered into a derivative contract as a result of a commutation. The fair value of the derivative is determined using a discounted cash flow model. Key inputs include unobservable cash flows projected over the expected term of the derivative, discounted using observable discount rates and CDS spreads. Description of the BET Model Valuation Model Overview The Company uses the BET Model to estimate what a bond insurer would charge to guarantee a transaction at the measurement date, based on the market-im plied default risk of the underlying collateral and the remaining structural protection in a deductible or subordination. Inputs to the process of determining fair value for structured transactions using the BET Model include estimates of collateral loss, allocation of loss to separate tranches of the capital structure, and calculation of the change in value. Model Strengths and Weaknesses The primary strengths of the BET Model: • The model takes account of transaction structure and key drivers of fair value. Transaction structure includes par insured, weighted average life, level of deductible or subordination (if any), and composition of collateral. • The model is a consistent approach to marking positions that minimizes the level of subjectivity. The Company has also developed a hierarchy for usage of various market-based spread inputs that reduces the level of subjectivity, especially during periods of high illiquidity. • The model uses market-based inputs including credit spreads for underlying ref erence collateral, recovery rates specific to the type and credit rating of reference collateral, diversity score of the entire collateral pool, and MBIA’s CDS and derivative recovery rate level. The primary weaknesses of the BET Model: As of December 31, 2014, some of the model inputs were either unobservable or derived from illiquid markets which might adversely impact the model’s reliability. The BET Model requires an input for collateral spreads. However, some securities are quoted only in price terms. For securities that trade substantially below par, the calculation of spreads from price to spread can be subjective. Results may be affected by using average spreads and a single diversity factor, rather than using specific spreads for each piece of under lying collateral and collateral-specific correlations. BET Model Inputs a. Credit spreads The average spread of collateral is a key input as the Company assumes credit spreads reflect the market’s assessment of default probability. Collateral assets are generally considered on an average basis rather than being modeled on an individual basis. Spreads are obtained from market data sources published by third parties (e.g., dealer spread tables for assets most closely resembling collate ral within the Company’s transactions) as well as collateral-specific spreads on the underlying reference obligations provided by trustees or market sources. The Company also calculates spreads based on quoted prices and on internal assumptions about expec ted life, when pricing information is available and spread information is not. Over time, the data inputs change as new sources become available, existing sources are discontinued or are no longer considered to be reliable or the most appropriate. It is th e Company’s preference to use more observable spread inputs defined above. However, the Company may on occasion move to less observable spread inputs due to the discontinuation of data sources or due to the Company considering certain spread inputs no long er representative of market spreads. b. Diversity Scores Diversity scores are a means of estimating the diversification in a portfolio. The diversity score estimates the number of uncorrelated assets that are assumed to have the same loss distribution as t he actual portfolio of correlated assets. While diversity score is a required input into the BET model, due to current high levels of default within the collateral of the structures, diversity score does not have a significant impact on valuation. c. Reco very Rate The recovery rate represents the percentage of par expected to be recovered after an asset defaults, indicating the severity of a potential loss. MBIA generally uses rating agency recovery assumptions which may be adjusted to account for differen ces between the collateral used by the rating agencies and the actual collateral in MBIA-insured transactions. The Company may also adjust rating agency assumptions based on the performance of the collateral manager and on empirical market data. d. Nonperf ormance Risk The Company’s valuation methodology for insured credit derivative liabilities incorporates MBIA Corp.’s own nonperformance risk. The Company calculates the fair value by discounting the market value loss estimated through the BET Model at disc ount rates which include MBIA Corp.’s CDS spreads as of December 31, 2014. The CDS spreads assigned to each deal are based on the weighted average life of the deal. The Company limits the nonperformance impact so that the derivative liability could not be lower than MBIA Corp.’s recovery derivative price multiplied by the unadjusted derivative liability. Overall Model Results As of December 31, 2014 and 2013, the Company’s net insured CDS derivative liability was $244 million and $1.2 billion, respectively, based on the results of the aforementioned models. A significant driver of changes in fair value is MBIA Corp.’s nonperformance risk. In aggregate, the nonperformance calculation resulted in a pre-tax net insured derivativ e liability that was $92 million and $394 million lower than the net liability that would have been estimated if MBIA Corp. excluded nonperformance risk in its valuation as of December 31, 2014 and 2013, respectively. Nonperformance risk is a fair value concept and does not contradict MBIA Corp.’s internal view, based on fundamental credit analysis of MBIA Corp.’s economic condition, that MBIA Corp. will be able to pay all claims when due. Warrants Stock warrants issued by the Company are valued using the Black-Scholes m odel and are recorded at fair value. Inputs into the warrant valuation include the Company’s stock price, a volatility parameter, interest rates, and dividend data. As all significant input s are market-based and observable, warrants are categorized as Level 2 of the fair value hierarchy. Facility In the fourth quarter of 2013, the Company approved and initiated a plan to sell its Armonk, New York facility. As a result, the facility was class ified as held for sale as of December 31, 2014 and 2013 and presented within “Assets held for sale” on the Company’s consolidated balance sheet s and measured at the lower of its c arrying value or its fair value less cost to sell. The fair market value was esti mated based on an independent third-party appraisal. Th is item is categorized as Level 2 of the fair value hierarchy. Financial Guarantees Gross Financial Guarantees —The fair value of gross financial guarantees is determined using discounted cash flow tec hniques based on inputs that include (i) assumptions of expected losses on financial guarantee policies where loss reserves have not been recognized, (ii) amount of losses expected on financial guarantee policies where loss reserves have been established, net of expected recoveries, (iii) the cost of capital reserves required to support the financial guarantee liability, (iv) operating expenses, and (v) discount rates. The MBIA Corp. CDS spread and recovery rate are used as the discount rate for MBIA Corp., while the CDS spread and recovery rate of a similar municipal bond insurance company are used as the discount rate for National, as National does not have a published CDS spread and recovery rate. The carrying value of the Company’s gross financial guar antees consists of unearned premium revenue and loss and LAE reserves, net of the insurance loss recoverable as reported on MBIA’s consolidated balance sheets. Ceded Financial Guarantees — The fair value of ceded financial guarantees is determined by apply ing the percentage ceded to reinsurers to the related fair value of the gross financial guarantees. The carrying value of ceded financial guarantees consists of prepaid reinsurance premiums and reinsurance recoverable on paid and unpaid losses as reported within “Other assets” on the Company’s consolidated balance sheets. Significant Unobservable Inputs The following tables provide quantitative information regarding the significant unobservable inputs used by the Company for assets and liabilities measured at fair value on a recurring basis as of December 31, 2014 and 2013. These tables exclude inputs used to measure fair value that are not developed by the Company, such as broker prices and other third-party pricin g service valuations.
|  |  | Fair Value |  |  |  |  |  |
|  |  | as of |  |  |  |  |  | Range
|  |  | December 31, |  |  |  |  |  | (Weighted
In millions |  | 2014 |  | Valuation Techniques |  | Unobservable Input |  | Average)
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |
| Loans receivable at fair value |  | $ | 1,431 |  | Market prices adjusted for financial |  | Impact of financial guarantee |  | 0% - 10% (2%)
|  |  |  |  |  | guarantees provided to VIE obligations |  |  |  |
| Loan repurchase commitments |  |  | 379 |  | Discounted cash flow |  | Recovery rates(1) |  |
|  |  |  |  |  |  |  | Breach rates(1) |  |
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |
| Variable interest entity notes |  |  | 735 |  | Market prices of VIE assets |  | Impact of financial guarantee |  | 0% - 35% (16%)
|  |  |  |  |  | adjusted for financial guarantees provided |  |  |  |
Credit derivative liabilities, net: |  |  |  |  |  |  |  |  |
| CMBS |  |  | 224 |  | BET Model |  | Recovery rates |  | 25% - 90% (59%)
|  |  |  |  |  |  |  | Nonperformance risk |  | 12% - 29% (25%)
|  |  |  |  |  |  |  | Weighted average life (in years) |  | 1.3 - 3.2 (2.3)
|  |  |  |  |  |  |  | CMBS spreads |  | 0% - 41% (19%)
| Multi-sector CDO |  |  | 9 |  | Direct Price Model |  | Nonperformance risk |  | 53% - 53% (53%)
| Other |  |  | 11 |  | BET Model and Dual Default |  | Recovery rates |  | 42% - 45% (45%)
|  |  |  |  |  |  |  | Nonperformance risk |  | 41% - 51% (50%)
|  |  |  |  |  |  |  | Weighted average life (in years) |  | 0.2 - 7.9 (1.1)
Other derivative liabilities |  |  | 24 |  | Discounted cash flow |  | Cash flows |  | $0 - $83 ($42)(2)
____________ |  |  |  |  |
(1) - Recovery rates and breach rates include estimates about potential variations in the outcome of litigation with a counterparty.
(2) - Midpoint of cash flows are used for the weighted average.
|  |  | Fair Value |  |  |  |  |  |  |
|  |  | as of |  |  |  |  |  | Range |
|  |  | December 31, |  |  |  |  |  | (Weighted |
In millions |  | 2013 |  | Valuation Techniques |  | Unobservable Input |  | Average) |
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |
| Loans receivable at fair value |  | $ | 1,612 |  | Market prices adjusted for financial |  | Impact of financial guarantee |  | 0% - 17% (3%) |
|  |  |  |  |  | guarantees provided to VIE obligations |  |  |  |  |
| Loan repurchase commitments |  |  | 359 |  | Discounted cash flow |  | Recovery rates(1) |  |  |
|  |  |  |  |  |  |  | Breach rates(1) |  |  |
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |
| Variable interest entity notes |  |  | 940 |  | Market prices of VIE assets |  | Impact of financial guarantee |  | 0% - 25% (12%) |
|  |  |  |  |  | adjusted for financial guarantees provided |  |  |  |  |
Credit derivative liabilities, net: |  |  |  |  |  |  |  |  |  |
| CMBS |  |  | 1,050 |  | BET Model |  | Recovery rates |  | 25% - 90% (60%) |
|  |  |  |  |  |  |  | Nonperformance risk |  | 8% - 57% (25%) |
|  |  |  |  |  |  |  | Weighted average life (in years) |  | 1.1-28.0 (3.3) |
|  |  |  |  |  |  |  | CMBS spreads |  | 1% - 29% (13%) |
| Multi-sector CDO |  |  | 12 |  | Direct Price Model |  | Nonperformance risk |  | 57%-57% (57%) |
| Other |  |  | 85 |  | BET Model and Dual Default |  | Recovery rates |  | 42%-90% (45%) |
|  |  |  |  |  |  |  | Nonperformance risk |  | 13% - 54% (25%) |
|  |  |  |  |  |  |  | Weighted average life (in years) |  | 0.2 - 8.7 (2.3) |
| ____________ |  |  |  |  |
| (1) - Recovery rates and breach rates include estimates about potential variations in the outcome of litigation with a counterparty.
Sensitivity of Significant Unobservable Inputs The significant unobservable input used in the fair value measurement of the Company’s loans receivable at fair value of consolidated VIEs is the impact of the financial guarantee. The fair value of loans receivable is calculated by subtracting the value of the financial guarantee from the market value of VIE liabilities. The value of a financial guarantee is estimated by the Company as the present value of expected cash payments under the policy. As expected cash payments provided by the Company under the insurance policy increase, there is a lower expected cash flow on the underlying loans receivable of the VIE. This results in a lower fair value of the loans receivable in relation to the obligations of the VIE. The significant unobservable inputs used in the fair value measurement of the Company’s loan repurchase commitments of consolidated VIEs are the recovery rates and breach rates. Reco very rates reflect the estimates of future cash flows reduced for litigation delays and risks and/or potential financial distress of the sellers/servicers. The estimated recoveries of the loan repurchase commitments may differ from the actual recoveries th at may be received in the future. Breach rates represent the rate at which mortgages fail to comply with stated representations and warranties of the sellers/servicers. Significant increases or decreases in the recovery rates and the breach rates would re sult in significantly higher or lower fair values of the loan repurchase commitments, respectively. Additionally, changes in the legal environment and the ability of the counterparties to pay would impact the recovery rate assumptions, which could signific antly impact the fair value measurement. Any significant challenges by the counterparties to the Company’s determination of breaches of representations and warranties could significantly adversely impact the fair value measurement. Recovery rates and bre ach rates are determined independently. Changes in one input will not necessarily have any impact on the other input. The significant unobservable input used in the fair value measurement of the Company’s VIE notes of consolidated VIEs is the impact of th e financial guarantee. The fair value of VIE notes is calculated by adding the value of the financial guarantee to the market value of VIE assets. The value of a financial guarantee is estimated by the Company as the present value of expected cash payments under the policy. As the value of the guarantee provided by the Company to the obligations issued by the VIE increases, the credit support adds value to the liabilities of the VIE. This results in an increase in the fair value of the liabilities of the VI E. The significant unobservable inputs used in the fair value measurement of MBIA Corp.’s CMBS credit derivatives, which are valued using the BET Model, are CMBS spreads, recovery rates, nonperformance risk and weighted average life. The CMBS spread is an indicator of credit risk of the collateral securities. The recovery rate represents the percentage of notional expected to be recovered after an asset defaults, indicating the severity of a potential loss. The nonperformance risk is an assumption of MBIA C orp.’s own ability to pay and whether MBIA Corp. will have the necessary resources to pay the obligations as they come due. Weighted average life is based on the Company’s estimate of when the principal of the underlying collateral of the CMBS structure wi ll be repaid. A significant increase or decrease in CMBS spreads would result in a n increase or decrease in the fair value of the derivative liabilit y, respectively. A significant increase in weighted average life can result in an increase or decrease in t he fair value of the derivative liability, depending on the discount rate and the timing of significant losses. Any significant increase or decrease in recovery rates, or MBIA Corp.’s nonperformance risk would result in a decrease or increase in the fair v alue of the derivative liabilities, respectively. CMBS spreads, recovery rates, nonperformance risk and weighted average lives are determined independently. Changes in one input will not necessarily have any impact on the other inputs. The significant unob servable input used in the fair value measurement of MBIA Corp.’s multi-sector CDO credit derivatives, which are valued using the Direct Price Model, is nonperformance risk. The nonperformance risk is an assumption of MBIA Corp.’s own ability to pay and wh ether MBIA Corp. will have the necessary resources to pay the obligations as they come due. Any significant increase or decrease in MBIA Corp.’s nonperformance risk would result in a decrease or increase in the fair value of the derivative liabilities, res pectively. The significant unobservable inputs used in the fair value measurement of MBIA Corp.’s other credit derivatives, which are valued using the BET Model and Dual Default, are recovery rates, nonperformance risk and weighted average life. The recove ry rate represents the percentage of notional expected to be recovered after an asset defaults, indicating the severity of a potential loss. The nonperformance risk is an assumption of MBIA Corp.’s own ability to pay and whether MBIA Corp. will have the ne cessary resources to pay the obligations as they come due. Weighted average life is based on MBIA Corp.’s estimate of when the principal of the underlying collateral will be repaid. A significant increase in weighted average life can result in an increase or decrease in the fair value of the derivative liability, depending on the discount rate and the timing of significant losses. Any significant increase or decrease in recovery rates or MBIA Corp.’s nonperformance risk would result in a decrease or increas e in the fair value of the derivative liabilities, respectively. Recovery rates, nonperformance risk and weighted average lives are determined independently. Changes in one input will not necessarily have any impact on the other inputs. The significant uno bservable input used in the fair value measurement of MBIA Corp.’s other derivatives, which are valued using a discounted cash flow m odel, is the estimates of future cash flows discounted using market rates and CDS spreads. Any significant increase or decrease in future cash flows would result in a n increase or decrease in the fair value of the derivative liabilit y, respectively. Fair Value Measurements The following tables present the fair value of the Company’s assets (incl uding short-term investments) and liabilities measured and reported at fair value on a recurring basis as of December 31, 2014 and 2013:
|  |  |  |  |  | Fair Value Measurements at Reporting Date Using |  |  |
|  |  |  |  |  | Quoted Prices in |  | Significant |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Active Markets |  | Other |  | Significant |  |  | Counterparty |  |  |
|  |  |  |  |  | for Identical |  | Observable |  | Unobservable |  |  | and Cash |  | Balance as of
|  |  |  |  |  | Assets |  | Inputs |  | Inputs |  |  | Collateral |  | December 31,
In millions |  | (Level 1) |  | (Level 2) |  | (Level 3) |  |  | Netting |  | 2014
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed-maturity investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| U.S. Treasury and government agency |  | $ | 573 |  | $ | 118 |  | $ | - |  |  | $ | - |  | $ | 691
| State and municipal bonds |  |  | - |  |  | 1,724 |  |  | 8 | (1) |  |  | - |  |  | 1,732
| Foreign governments |  |  | 221 |  |  | 63 |  |  | 6 | (1) |  |  | - |  |  | 290
| Corporate obligations |  |  | - |  |  | 2,048 |  |  | 10 | (1) |  |  | - |  |  | 2,058
| Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Residential mortgage-backed agency |  |  | - |  |  | 1,162 |  |  | - |  |  |  | - |  |  | 1,162
|  | Residential mortgage-backed non-agency |  |  | - |  |  | 56 |  |  | - |  |  |  | - |  |  | 56
|  | Commercial mortgage-backed |  |  | - |  |  | 20 |  |  | 2 | (1) |  |  | - |  |  | 22
| Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Collateralized debt obligations |  |  | - |  |  | 6 |  |  | 87 | (1) |  |  | - |  |  | 93
|  | Other asset-backed |  |  | - |  |  | 156 |  |  | 85 | (1) |  |  | - |  |  | 241
|  |  | Total fixed-maturity investments |  |  | 794 |  |  | 5,353 |  |  | 198 |  |  |  | - |  |  | 6,345
Money market securities |  |  | 428 |  |  | - |  |  | - |  |  |  | - |  |  | 428
Perpetual debt and equity securities |  |  | 22 |  |  | 31 |  |  | - |  |  |  | - |  |  | 53
Cash and cash equivalents |  |  | 729 |  |  | - |  |  | - |  |  |  | - |  |  | 729
Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Non-insured derivative assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Interest rate derivatives |  |  | - |  |  | 83 |  |  | - |  |  |  | (81) |  |  | 2
Assets held for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Equity securities |  |  | 6 |  |  | - |  |  | - |  |  |  | - |  |  | 6
| Loans receivable at fair value |  |  | - |  |  | 711 |  |  | - |  |  |  | - |  |  | 711
| Cash and cash equivalents |  |  | 55 |  |  | - |  |  | - |  |  |  | - |  |  | 55
|  |  |  |  |  | Fair Value Measurements at Reporting Date Using |  |  |
|  |  |  |  |  | Quoted Prices in |  | Significant |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Active Markets |  | Other |  | Significant |  |  | Counterparty |  |  |
|  |  |  |  |  | for Identical |  | Observable |  | Unobservable |  |  | and Cash |  | Balance as of
|  |  |  |  |  | Assets |  | Inputs |  | Inputs |  |  | Collateral |  | December 31,
In millions |  | (Level 1) |  | (Level 2) |  | (Level 3) |  |  | Netting |  | 2014
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Corporate obligations |  |  | - |  |  | 10 |  |  | 55 | (1) |  |  | - |  |  | 65
| Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Residential mortgage-backed non-agency |  |  | - |  |  | 194 |  |  | 3 | (1) |  |  | - |  |  | 197
|  | Commercial mortgage-backed |  |  | - |  |  | 86 |  |  | - |  |  |  | - |  |  | 86
| Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Collateralized debt obligations |  |  | - |  |  | 7 |  |  | 5 | (1) |  |  | - |  |  | 12
|  | Other asset-backed |  |  | - |  |  | 35 |  |  | 26 | (1) |  |  | - |  |  | 61
| Cash |  |  | 53 |  |  | - |  |  | - |  |  |  | - |  |  | 53
| Loans receivable at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Residential loans receivable |  |  | - |  |  | - |  |  | 1,431 |  |  |  | - |  |  | 1,431
| Loan repurchase commitments |  |  | - |  |  | - |  |  | 379 |  |  |  | - |  |  | 379
Total assets |  | $ | 2,087 |  | $ | 6,510 |  | $ | 2,097 |  |  | $ | (81) |  | $ | 10,613
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Medium-term notes |  | $ | - |  | $ | - |  | $ | 197 | (1) |  | $ | - |  | $ | 197
Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Insured derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Credit derivatives |  |  | - |  |  | 2 |  |  | 244 |  |  |  | - |  |  | 246
| Non-insured derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Interest rate derivatives |  |  | - |  |  | 248 |  |  | - |  |  |  | (81) |  |  | 167
|  | Other |  |  | - |  |  | - |  |  | 24 |  |  |  | - |  |  | 24
Liabilities held for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Variable interest entity notes |  |  | - |  |  | 431 |  |  | - |  |  |  | - |  |  | 431
| Payable for loans purchased |  |  | - |  |  | 323 |  |  | - |  |  |  | - |  |  | 323
Other liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Warrants |  |  | - |  |  | 28 |  |  | - |  |  |  | - |  |  | 28
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Variable interest entity notes |  |  | - |  |  | 1,312 |  |  | 735 |  |  |  | - |  |  | 2,047
Total liabilities |  | $ | - |  | $ | 2,344 |  | $ | 1,200 |  |  | $ | (81) |  | $ | 3,463
____________ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(1) - Unobservable inputs are either not developed by the Company or do not significantly impact the overall fair values of the aggregate financial assets and liabilities.
|  |  |  |  |  | Fair Value Measurements at Reporting Date Using |  |  |
|  |  |  |  |  | Quoted Prices in |  | Significant |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Active Markets |  | Other |  | Significant |  |  | Counterparty |  |  |
|  |  |  |  |  | for Identical |  | Observable |  | Unobservable |  |  | and Cash |  | Balance as of
|  |  |  |  |  | Assets |  | Inputs |  | Inputs |  |  | Collateral |  | December 31,
In millions |  | (Level 1) |  | (Level 2) |  | (Level 3) |  |  | Netting |  | 2013
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed-maturity investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| U.S. Treasury and government agency |  | $ | 397 |  | $ | 156 |  | $ | - |  |  | $ | - |  | $ | 553
| State and municipal bonds |  |  | - |  |  | 1,765 |  |  | 19 | (1) |  |  | - |  |  | 1,784
| Foreign governments |  |  | 112 |  |  | 65 |  |  | 12 | (1) |  |  | - |  |  | 189
| Corporate obligations |  |  | - |  |  | 1,776 |  |  | 48 | (1) |  |  | - |  |  | 1,824
| Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Residential mortgage-backed agency |  |  | - |  |  | 1,173 |  |  | - |  |  |  | - |  |  | 1,173
|  | Residential mortgage-backed non-agency |  |  | - |  |  | 86 |  |  | 6 | (1) |  |  | - |  |  | 92
|  | Commercial mortgage-backed |  |  | - |  |  | 25 |  |  | 14 | (1) |  |  | - |  |  | 39
| Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Collateralized debt obligations |  |  | - |  |  | 72 |  |  | 82 | (1) |  |  | - |  |  | 154
|  | Other asset-backed |  |  | - |  |  | 130 |  |  | 58 | (1) |  |  | - |  |  | 188
|  |  | Total fixed-maturity investments |  |  | 509 |  |  | 5,248 |  |  | 239 |  |  |  | - |  |  | 5,996
Money market securities |  |  | 783 |  |  | - |  |  | - |  |  |  | - |  |  | 783
Perpetual debt and equity securities |  |  | 27 |  |  | 13 |  |  | 11 | (1) |  |  | - |  |  | 51
Cash and cash equivalents |  |  | 1,161 |  |  | - |  |  | - |  |  |  | - |  |  | 1,161
Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Non-insured derivative assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Interest rate derivatives |  |  | - |  |  | 46 |  |  | - |  |  |  | (42) |  |  | 4
|  |  |  |  |  | Fair Value Measurements at Reporting Date Using |  |  |
|  |  |  |  |  | Quoted Prices in |  | Significant |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Active Markets |  | Other |  | Significant |  |  | Counterparty |  |  |
|  |  |  |  |  | for Identical |  | Observable |  | Unobservable |  |  | and Cash |  | Balance as of
|  |  |  |  |  | Assets |  | Inputs |  | Inputs |  |  | Collateral |  | December 31,
In millions |  | (Level 1) |  | (Level 2) |  | (Level 3) |  |  | Netting |  | 2013
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Corporate obligations |  |  | - |  |  | 41 |  |  | 48 | (1) |  |  | - |  |  | 89
| Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Residential mortgage-backed non-agency |  |  | - |  |  | 255 |  |  | 4 | (1) |  |  | - |  |  | 259
|  | Commercial mortgage-backed |  |  | - |  |  | 102 |  |  | 3 | (1) |  |  | - |  |  | 105
| Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Collateralized debt obligations |  |  | - |  |  | 14 |  |  | 22 | (1) |  |  | - |  |  | 36
|  | Other asset-backed |  |  | - |  |  | 44 |  |  | 54 | (1) |  |  | - |  |  | 98
| Money market securities |  |  | 136 |  |  | - |  |  | - |  |  |  | - |  |  | 136
| Cash |  |  | 97 |  |  | - |  |  | - |  |  |  | - |  |  | 97
| Loans receivable at fair value |  |  | - |  |  | - |  |  | 1,612 |  |  |  | - |  |  | 1,612
| Loan repurchase commitments |  |  | - |  |  | - |  |  | 359 |  |  |  | - |  |  | 359
Total assets |  | $ | 2,713 |  | $ | 5,763 |  | $ | 2,352 |  |  | $ | (42) |  | $ | 10,786
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Medium-term notes |  | $ | - |  | $ | - |  | $ | 203 | (1) |  | $ | - |  | $ | 203
Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Insured derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Credit derivatives |  |  | - |  |  | 5 |  |  | 1,147 |  |  |  | - |  |  | 1,152
| Non-insured derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Interest rate derivatives |  |  | - |  |  | 165 |  |  | - |  |  |  | (165) |  |  | -
Other liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Warrants |  |  | - |  |  | 59 |  |  | - |  |  |  | - |  |  | 59
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Variable interest entity notes |  |  | - |  |  | 1,416 |  |  | 940 |  |  |  | - |  |  | 2,356
| Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Currency derivatives |  |  | - |  |  | - |  |  | 11 | (1) |  |  | - |  |  | 11
Total liabilities |  | $ | - |  | $ | 1,645 |  | $ | 2,301 |  |  | $ | (165) |  | $ | 3,781
____________ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(1) - Unobservable inputs are either not developed by the Company or do not significantly impact the overall fair values of the aggregate financial assets and liabilities.
Level 3 assets at fair value as of December 31, 2014 and 2013 represented approximately 20% and 22%, respectively, of total assets measured at fair value. Level 3 liabilities at fair value as of December 31, 2014 and 2013 represented approximately 35% and 61%, respectively, of total liabilities measured at fair value. The following tables present the fair values and carrying va lues of the Company’s assets and liabilities that are disclosed at fair value but not reported at fair value on the Company’s consolidated balance sheets as of December 31, 2014 and 2013:
|  |  | Fair Value Measurements at Reporting Date Using |  |  |  |  |  |  |
|  |  | Quoted Prices in |  | Significant |  | Significant |  | Fair Value |  | Carry Value |
|  |  | Active Markets for |  | Other Observable |  | Unobservable |  | Balance as of |  | Balance as of |
|  |  | Identical Assets |  | Inputs |  | Inputs |  | December 31, |  | December 31, |
In millions |  | (Level 1) |  | (Level 2) |  | (Level 3) |  | 2014 |  | 2014 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Other investments |  | $ | - |  | $ | - |  | $ | 4 |  | $ | 4 |  | $ | 4 |
| Accrued investment income(1) |  |  | - |  |  | 43 |  |  | - |  |  | 43 |  |  | 43 |
| Receivable for investments sold(1) |  |  | - |  |  | 69 |  |  | - |  |  | 69 |  |  | 69 |
Assets held for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Facility |  |  | - |  |  | 26 |  |  | - |  |  | 26 |  |  | 26 |
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Investments held-to-maturity |  |  | - |  |  | - |  |  | 2,632 |  |  | 2,632 |  |  | 2,757 |
Total assets |  | $ | - |  | $ | 138 |  | $ | 2,636 |  | $ | 2,774 |  | $ | 2,899 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Investment agreements |  | $ | - |  | $ | - |  | $ | 705 |  | $ | 705 |  | $ | 547 |
| Medium-term notes |  |  | - |  |  | - |  |  | 801 |  |  | 801 |  |  | 1,004 |
| Long-term debt |  |  | - |  |  | 1,172 |  |  | - |  |  | 1,172 |  |  | 1,810 |
| Payable for investments purchased(2) |  |  | - |  |  | 42 |  |  | - |  |  | 42 |  |  | 42 |
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Variable interest entity notes |  |  | - |  |  | - |  |  | 2,779 |  |  | 2,779 |  |  | 2,757 |
Total liabilities |  | $ | - |  | $ | 1,214 |  | $ | 4,285 |  | $ | 5,499 |  | $ | 6,160 |
Financial Guarantees: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Gross |  | $ | - |  | $ | - |  | $ | 4,051 |  | $ | 4,051 |  | $ | 1,959 |
| Ceded |  |  | - |  |  | - |  |  | 109 |  |  | 109 |  |  | 65 |
__________ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(1) - Reported within "Other assets" on MBIA's consolidated balance sheets.
(2) - Reported within "Other liabilities" on MBIA's consolidated balance sheets.
|  |  | Fair Value Measurements at Reporting Date Using |  |  |  |  |  |
|  |  | Quoted Prices in |  | Significant |  | Significant |  | Fair Value |  | Carry Value
|  |  | Active Markets for |  | Other Observable |  | Unobservable |  | Balance as of |  | Balance as of
|  |  | Identical Assets |  | Inputs |  | Inputs |  | December 31, |  | December 31,
In millions |  | (Level 1) |  | (Level 2) |  | (Level 3) |  | 2013 |  | 2013
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Other investments |  | $ | - |  | $ | - |  | $ | 4 |  | $ | 4 |  | $ | 5
| Accrued investment income(1) |  |  | - |  |  | 52 |  |  | - |  |  | 52 |  |  | 52
| Receivable for investments sold(1) |  |  | - |  |  | 22 |  |  | - |  |  | 22 |  |  | 22
| Net cash collateral pledged(1) |  |  | 24 |  |  | - |  |  | - |  |  | 24 |  |  | 24
Assets held for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Facility |  |  | - |  |  | 29 |  |  | - |  |  | 29 |  |  | 29
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Investments held-to-maturity |  |  | - |  |  | - |  |  | 2,651 |  |  | 2,651 |  |  | 2,801
Total assets |  | $ | 24 |  | $ | 103 |  | $ | 2,655 |  | $ | 2,782 |  | $ | 2,933
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Investment agreements |  | $ | - |  | $ | - |  | $ | 814 |  | $ | 814 |  | $ | 700
| Medium-term notes |  |  | - |  |  | - |  |  | 927 |  |  | 927 |  |  | 1,224
| Long-term debt |  |  | - |  |  | 1,412 |  |  | - |  |  | 1,412 |  |  | 1,702
| Payable for investments purchased(2) |  |  | - |  |  | 31 |  |  | - |  |  | 31 |  |  | 31
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Variable interest entity notes |  |  | - |  |  | - |  |  | 2,751 |  |  | 2,751 |  |  | 2,930
Total liabilities |  | $ | - |  | $ | 1,443 |  | $ | 4,492 |  | $ | 5,935 |  | $ | 6,587
Financial Guarantees: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Gross |  | $ | - |  | $ | - |  | $ | 2,843 |  | $ | 2,843 |  | $ | 2,388
| Ceded |  |  | - |  |  | - |  |  | 71 |  |  | 71 |  |  | 76
__________ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(1) - Reported within "Other assets" on MBIA's consolidated balance sheets.
(2) - Reported within "Other liabilities" on MBIA's consolidated balance sheets.
The following tables present information about changes in Level 3 assets (including short-term investments) and liabilities measured at fair value on a recurring basis for the years ended December 31, 2014 and 2013:
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Year Ended December 31, 2014
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Change in
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Unrealized
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Gains
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (Losses) for
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | the Period
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Included in
|  |  |  |  |  |  |  | Unrealized |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Earnings for
|  |  |  |  |  |  |  | Gains / |  | Unrealized |  | Foreign |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Assets
|  |  |  |  |  |  |  | (Losses) |  | Gains / |  | Exchange |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | still held
|  | Balance, |  | Realized |  | Included |  | (Losses) |  | Recognized |  |  |  |  |  |  |  |  |  |  |  |  |  | Transfers |  | Transfers |  |  |  |  | as of
|  | Beginning |  | Gains / |  | in |  | Included |  | in OCI or |  |  |  |  |  |  |  |  |  |  |  |  |  | into |  | out of |  | Ending |  | December 31,
In millions |  | of Year |  | (Losses) |  | Earnings |  | in OCI |  | Earnings |  | Purchases |  | Issuances |  | Settlements |  | Sales |  | Level 3(1) |  | Level 3(1) |  | Balance |  | 2014
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign governments |  | $ | 12 |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | (15) |  | $ | - |  | $ | 9 |  | $ | - |  | $ | 6 |  | $ | -
Corporate obligations |  |  | 48 |  |  | 2 |  |  | 3 |  |  | (3) |  |  | (1) |  |  | 10 |  |  | - |  |  | (7) |  |  | (48) |  |  | 7 |  |  | (1) |  |  | 10 |  |  | -
Residential mortgage- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
backed agency |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (8) |  |  | - |  |  | 37 |  |  | (29) |  |  | - |  |  | -
Residential mortgage- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
backed non-agency |  |  | 6 |  |  | - |  |  | - |  |  | (1) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (5) |  |  | - |  |  | -
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
mortgage-backed |  |  | 14 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (14) |  |  | - |  |  | 3 |  |  | (1) |  |  | 2 |  |  | -
Collateralized debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
obligations |  |  | 82 |  |  | (2) |  |  | 1 |  |  | 28 |  |  | - |  |  | 5 |  |  | - |  |  | (15) |  |  | (41) |  |  | 36 |  |  | (7) |  |  | 87 |  |  | -
Other asset-backed |  |  | 58 |  |  | - |  |  | - |  |  | 4 |  |  | - |  |  | 11 |  |  | - |  |  | (12) |  |  | (1) |  |  | 52 |  |  | (27) |  |  | 85 |  |  | -
State and municipal |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
bonds |  |  | 19 |  |  | - |  |  | - |  |  | 3 |  |  | - |  |  | - |  |  | - |  |  | (4) |  |  | (4) |  |  | 46 |  |  | (52) |  |  | 8 |  |  | -
Perpetual debt and equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
securities |  |  | 11 |  |  | - |  |  | 2 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (13) |  |  | 4 |  |  | (4) |  |  | - |  |  | -
Assets of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate obligations |  |  | 48 |  |  | - |  |  | (10) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (5) |  |  | (3) |  |  | 25 |  |  | - |  |  | 55 |  |  | -
Residential mortgage- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
backed non-agency |  |  | 4 |  |  | - |  |  | (1) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (1) |  |  | - |  |  | 2 |  |  | (1) |  |  | 3 |  |  | -
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
mortgage-backed |  |  | 3 |  |  | - |  |  | (3) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Collateralized debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
obligations |  |  | 22 |  |  | - |  |  | (10) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (5) |  |  | - |  |  | 1 |  |  | (3) |  |  | 5 |  |  | 1
Other asset-backed |  |  | 54 |  |  | - |  |  | (26) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (10) |  |  | - |  |  | 18 |  |  | (10) |  |  | 26 |  |  | (9)
Loans receivable |  |  | 1,612 |  |  | - |  |  | 39 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (220) |  |  | - |  |  | - |  |  | - |  |  | 1,431 |  |  | 39
Loan repurchase |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
commitments |  |  | 359 |  |  | - |  |  | 20 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 379 |  |  | 20
Total assets |  | $ | 2,352 |  | $ | - |  | $ | 15 |  | $ | 31 |  | $ | (1) |  | $ | 26 |  | $ | - |  | $ | (316) |  | $ | (110) |  | $ | 240 |  | $ | (140) |  | $ | 2,097 |  | $ | 51
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Change in
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Unrealized
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (Gains)
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Losses for
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | the Period
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Included in
|  |  |  |  |  |  |  | Unrealized |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Earnings for
|  |  |  |  |  |  |  | (Gains) / |  | Unrealized |  | Foreign |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Liabilities
|  |  |  |  |  |  |  | Losses |  | (Gains) / |  | Exchange |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | still held
|  | Balance, |  | Realized |  | Included |  | Losses |  | Recognized |  |  |  |  |  |  |  |  |  |  |  |  |  | Transfers |  | Transfers |  |  |  |  | as of
|  | Beginning |  | (Gains) / |  | in |  | Included |  | in OCI or |  |  |  |  |  |  |  |  |  |  |  |  |  | into |  | out of |  | Ending |  | December 31,
In millions |  | of Year |  | Losses |  | Earnings |  | in OCI |  | Earnings |  | Purchases |  | Issuances |  | Settlements |  | Sales |  | Level 3(1) |  | Level 3(1) |  | Balance |  | 2014
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Medium-term notes |  | $ | 203 |  | $ | - |  | $ | 20 |  | $ | - |  | $ | (26) |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | 197 |  | $ | (6)
Credit derivatives, net |  |  | 1,147 |  |  | 415 |  |  | (903) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (415) |  |  | - |  |  | - |  |  | - |  |  | 244 |  |  | (20)
Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
derivatives, net |  |  | - |  |  | 30 |  |  | (6) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 24 |  |  | (6)
Liabilities of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
VIE notes |  |  | 940 |  |  | - |  |  | 46 |  |  | - |  |  | - |  |  | - |  |  | 3 |  |  | (211) |  |  | (43) |  |  | - |  |  | - |  |  | 735 |  |  | 42
Currency derivatives, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
net |  |  | 11 |  |  | - |  |  | (5) |  |  | - |  |  | (6) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (11)
Total liabilities |  | $ | 2,301 |  | $ | 445 |  | $ | (848) |  | $ | - |  | $ | (32) |  | $ | - |  | $ | 3 |  | $ | (626) |  | $ | (43)(2) |  | $ | - |  | $ | - |  | $ | 1,200 |  | $ | (1)
_______________ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(1) - Transferred in and out at the end of the period.
(2) - Primarily relates to the deconsolidation of VIEs.
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Year Ended December 31, 2013
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Change in
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Unrealized
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Gains
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (Losses) for
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | the Period
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Included in
|  |  |  |  |  |  |  | Unrealized |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Earnings for
|  |  |  |  |  |  |  | Gains / |  | Unrealized |  | Foreign |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Assets
|  |  |  |  |  |  |  | (Losses) |  | Gains / |  | Exchange |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | still held
|  | Balance, |  | Realized |  | Included |  | (Losses) |  | Recognized |  |  |  |  |  |  |  |  |  |  |  |  |  | Transfers |  | Transfers |  |  |  |  | as of
|  | Beginning |  | Gains / |  | in |  | Included |  | in OCI or |  |  |  |  |  |  |  |  |  |  |  |  |  | into |  | out of |  | Ending |  | December 31,
In millions |  | of Year |  | (Losses) |  | Earnings |  | in OCI |  | Earnings |  | Purchases |  | Issuances |  | Settlements |  | Sales |  | Level 3(1) |  | Level 3(1) |  | Balance |  | 2013
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign governments |  | $ | 3 |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | 10 |  | $ | - |  | $ | (16) |  | $ | - |  | $ | 18 |  | $ | (3) |  | $ | 12 |  | $ | -
Corporate obligations |  |  | 76 |  |  | (5) |  |  | 7 |  |  | 13 |  |  | - |  |  | 1 |  |  | - |  |  | (16) |  |  | (28) |  |  | 1 |  |  | (1) |  |  | 48 |  |  | 7
Residential mortgage- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
backed agency |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (1) |  |  | - |  |  | 20 |  |  | (19) |  |  | - |  |  | -
Residential mortgage- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
backed non-agency |  |  | 4 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (2) |  |  | - |  |  | 5 |  |  | (1) |  |  | 6 |  |  | -
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
mortgage-backed |  |  | 28 |  |  | - |  |  | - |  |  | 4 |  |  | - |  |  | - |  |  | - |  |  | (1) |  |  | (19) |  |  | 3 |  |  | (1) |  |  | 14 |  |  | -
Collateralized debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
obligations |  |  | 31 |  |  | (2) |  |  | 1 |  |  | 12 |  |  | - |  |  | 61 |  |  | - |  |  | (17) |  |  | (5) |  |  | 31 |  |  | (30) |  |  | 82 |  |  | 1
Other asset-backed |  |  | 26 |  |  |  |  |  | - |  |  | (3) |  |  | - |  |  | 3 |  |  | - |  |  | (10) |  |  | - |  |  | 47 |  |  | (5) |  |  | 58 |  |  | -
State and municipal |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
bonds |  |  | 103 |  |  | 2 |  |  | - |  |  | (1) |  |  | - |  |  | - |  |  | - |  |  | (5) |  |  | (13) |  |  | 42 |  |  | (109) |  |  | 19 |  |  | -
Perpetual debt and equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
securities |  |  | 14 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (3) |  |  | 11 |  |  | -
Assets of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate obligations |  |  | 78 |  |  | (4) |  |  | (7) |  |  | 6 |  |  | - |  |  | - |  |  | - |  |  | (4) |  |  | (24) |  |  | 3 |  |  | - |  |  | 48 |  |  | -
Residential mortgage- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
backed non-agency |  |  | 6 |  |  | - |  |  | 6 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (7) |  |  | - |  |  | 3 |  |  | (4) |  |  | 4 |  |  | -
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
mortgage-backed |  |  | 7 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (24) |  |  | 20 |  |  | - |  |  | 3 |  |  | 1
Collateralized debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
obligations |  |  | 125 |  |  | - |  |  | (8) |  |  | 5 |  |  | - |  |  | - |  |  | - |  |  | (5) |  |  | (85) |  |  | 4 |  |  | (14) |  |  | 22 |  |  | 1
Other asset-backed |  |  | 64 |  |  | - |  |  | (9) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (14) |  |  | (2) |  |  | 21 |  |  | (6) |  |  | 54 |  |  | 2
Loans receivable |  |  | 1,881 |  |  | - |  |  | 180 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (275) |  |  | (174) |  |  | - |  |  | - |  |  | 1,612 |  |  | 166
Loan repurchase |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
commitments |  |  | 1,086 |  |  | - |  |  | 172 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (899) |  |  | - |  |  | - |  |  | - |  |  | 359 |  |  | 172
Total assets |  | $ | 3,532 |  | $ | (9) |  | $ | 342 |  | $ | 36 |  | $ | - |  | $ | 75 |  | $ | - |  | $ | (1,272) |  | $ | (374) |  | $ | 218 |  | $ | (196) |  | $ | 2,352 |  | $ | 350
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Change in
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Unrealized
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (Gains)
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Losses for
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | the Period
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Included in
|  |  |  |  |  |  |  | Unrealized |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Earnings for
|  |  |  |  |  |  |  | (Gains) / |  | Unrealized |  | Foreign |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Liabilities
|  |  |  |  |  |  |  | Losses |  | (Gains) / |  | Exchange |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | still held
|  | Balance, |  | Realized |  | Included |  | Losses |  | Recognized |  |  |  |  |  |  |  |  |  |  |  |  |  | Transfers |  | Transfers |  |  |  |  | as of
|  | Beginning |  | (Gains) / |  | in |  | Included |  | in OCI or |  |  |  |  |  |  |  |  |  |  |  |  |  | into |  | out of |  | Ending |  | December 31,
In millions |  | of Year |  | Losses |  | Earnings |  | in OCI |  | Earnings |  | Purchases |  | Issuances |  | Settlements |  | Sales |  | Level 3(1) |  | Level 3(1) |  | Balance |  | 2013
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Medium-term notes |  | $ | 165 |  | $ | - |  | $ | 29 |  | $ | - |  | $ | 9 |  | $ | - |  | $ | - |  | $ | - |  | $ |  |  | $ | - |  | $ | - |  | $ | 203 |  | $ | 38
Credit derivatives, net |  |  | 2,921 |  |  | 1,548 |  |  | (1,778) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (1,548) |  |  | - |  |  | 4 |  |  | - |  |  | 1,147 |  |  | 87
Interest rate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
derivatives, net |  |  | (1) |  |  | - |  |  | 2 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (1) |  |  | - |  |  | (18)
Currency |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
derivatives, net |  |  | 1 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (1) |  |  | - |  |  | -
Liabilities of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
VIE notes |  |  | 1,932 |  |  | - |  |  | 180 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (277) |  |  | (1,076) |  |  | 181 |  |  | - |  |  | 940 |  |  | 92
Currency derivatives, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
net |  |  | 21 |  |  | - |  |  | (10) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 11 |  |  | (10)
Total liabilities |  | $ | 5,039 |  | $ | 1,548 |  | $ | (1,577) |  | $ | - |  | $ | 9 |  | $ | - |  | $ | - |  | $ | (1,825) |  | $ | (1,076)(2) |  | $ | 185 |  | $ | (2) |  | $ | 2,301 |  | $ | 189
_______________ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(1) - Transferred in and out at the end of the period.
(2) - Primarily relates to the deconsolidation of VIEs.
Transfers into and out of Level 3 were $240 million and $140 million, respectively, for the year ended December 31, 2014. Transfers into and out of Level 2 were $140 million and $240 million, respectively, for the year ended December 31, 2014. Transfers into Level 3 were principally related to other ABS, state and municipal bonds, RMBS agency, CDO s, and corporate obligations, where inputs, which are signifi cant to their valuation, became unobservable during the period. State and municipal bonds, other ABS and RMBS agency comprised the majority of the transferred instruments out of Level 3 where inputs, which are significant to their valuation, became observa ble during the period. These inputs included spreads, prepayment speeds, default speeds, default severities, yield curves observable at commonly quoted intervals, and market corroborated inputs. There were no transfers into or out of Level 1. Transfers in to and out of Level 3 were $403 million and $198 million, respectively, for the year ended December 31, 2013. Transfers into and out of Level 2 were $198 million and $403 million, respectively, for the year ended December 31, 2013. Transfers into Level 3 were principally related to VIE notes, other ABS, state and municipal bonds, CDOs, CMBS and RMBS agency where inputs, which are significant to their valuation, b ecame unobservable during the period. State and municipal bonds, CDOs and RMBS agency comprised the majority of the transferred instruments out of Level 3 where inputs, which are significant to their valuation, became observable during the period. These i nputs included spreads, prepayment speeds, default speeds, default severities, yield curves observable at commonly quoted intervals, and market corroborated inputs. There were no transfers into or out of Level 1. All Level 1, 2 and 3 designations are mad e at the end of each accounting period. G a in s a n d l o ss e s (r eal i z e d a n d u n r eal i z e d) i n c l ude d i n ea r ni n g s relating t o Le v e l 3 a ss e t s an d li a bili t ie s f o r t h e years ended December 31, 2014 and 2013 a re r epo r t e d o n t h e Company’s c on s oli d a t e d s t a t e m en t s o f ope r a t ion s a s f ol l ow s:
|  |  |  |  | Change in Unrealized Gains (Losses)
|  |  |  |  |  |  |  |  | for the Period Included in Earnings
|  |  | Total Gains (Losses) |  | for Assets and Liabilities still
In millions |  | Included in Earnings |  | held as of December 31,
|  |  | 2014 |  | 2013 |  | 2012 |  | 2014 |  | 2013 |  | 2012
Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Unrealized gains (losses) on |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| insured derivatives |  | $ | 903 |  | $ | 1,778 |  | $ | 1,869 |  | $ | 20 |  | $ | (87) |  | $ | 927
| Realized gains (losses) and other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| settlements on insured derivatives |  |  | (445) |  |  | (1,548) |  |  | (407) |  |  | - |  |  | - |  |  | -
| Net gains (losses) on financial instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| at fair value and foreign exchange |  |  | 18 |  |  | (37) |  |  | 13 |  |  | 12 |  |  | (12) |  |  | (6)
| Net investment losses related to |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| other-than-temporary impairments |  |  | - |  |  | - |  |  | (68) |  |  | - |  |  | - |  |  | -
| Revenues of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Net gains (losses) on financial instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| at fair value and foreign exchange |  |  | (32) |  |  | 160 |  |  | (376) |  |  | 20 |  |  | 260 |  |  | (271)
Total |  | $ | 444 |  | $ | 353 |  | $ | 1,031 |  | $ | 52 |  | $ | 161 |  | $ | 650
Fair Value Option The Company elected to record at fair value certain financial instruments that have been consolidated in connection with the adoption of the accounting guidance for consolidation of VIEs, among others. The following table presents the changes in fair value included in the Company’s consolidated statements of operations for the years ended December 31, 2014, 2013 and 2012 for financial instruments for which the fair value option was elected:
|  |  |  | Years Ended December 31, |
| In millions |  | 2014 |  | 2013 |  | 2012 |
| Investments carried at fair value(1) |  | $ | 2 |  | $ | 8 |  | $ | 10 |
| Fixed-maturity securities held at fair value-VIE(2) |  |  | (104) |  |  | (74) |  |  | (55) |
| Loans receivable at fair value: |  |  |  |  |  |  |  |  |  |
|  | Residential mortgage loans(2) |  |  | (182) |  |  | (107) |  |  | (107) |
|  | Other loans(2) |  |  | 10 |  |  | 13 |  |  | (56) |
| Loan repurchase commitments(2) |  |  | 20 |  |  | 172 |  |  | 9 |
| Medium-term notes(1) |  |  | 6 |  |  | 38 |  |  | - |
| Variable interest entity notes (2) |  |  | 269 |  |  | 155 |  |  | 107 |
| ___________ |  |  |  |  |  |  |  |  |
| (1) - Reported within "Net gains (losses) on financial instruments at fair value and foreign exchange" on MBIA's consolidated statements of operations. |
| (2) - Reported within "Net gains (losses) on financial instruments at fair value and foreign exchange-VIE" on MBIA's consolidated statements of operations. |
T h e f ol l owin g t abl e r e f l e c t s t h e d i f f e r en ce be t wee n t h e ag g r ega t e f ai r v alu e an d t h e a gg r ega t e r e m a inin g c on t r a c t u a l p r in c i pa l bala n c e ou t s t a ndin g a s o f December 31, 2014 an d 2013 f o r loans and no t e s f o r wh i ch t h e f a i r v al u e o p t i o n w a s el e c t ed:
|  |  | As of December 31, 2014 |  |  | As of December 31, 2013
|  |  | Contractual |  |  |  |  |  |  |  | Contractual |  |  |  |  |  |
|  |  | Outstanding |  | Fair |  |  |  |  | Outstanding |  | Fair |  |  |
In millions |  | Principal |  | Value |  | Difference |  | Principal |  | Value |  | Difference
Loans receivable at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Residential mortgage loans |  | $ | 1,554 |  | $ | 1,377 |  | $ | 177 |  | $ | 1,846 |  | $ | 1,562 |  | $ | 284
| Residential mortgage loans (90 days or more past due) |  |  | 227 |  |  | 54 |  |  | 173 |  |  | 231 |  |  | 50 |  |  | 181
| Other loans |  |  | 721 |  |  | 711 |  |  | 10 |  |  | - |  |  | - |  |  | -
Total loans receivable at fair value |  | $ | 2,502 |  | $ | 2,142 |  | $ | 360 |  | $ | 2,077 |  | $ | 1,612 |  | $ | 465
Variable interest entity notes |  | $ | 3,584 |  | $ | 2,479 |  | $ | 1,105 |  | $ | 3,787 |  | $ | 2,356 |  | $ | 1,431
Medium-term notes |  | $ | 242 |  | $ | 197 |  | $ | 45 |  | $ | 276 |  | $ | 203 |  | $ | 73
S ub s t a n t i a l l y a l l g a i ns a nd l o s s e s i n c l ud e d i n e a r n i ngs dur i ng t he p e r i o ds e nd e d December 31, 2014 a nd 2013 on l o a ns r e c e i v a b l e a nd VIE notes reported in the preceding table a r e a t t r i bu t a b l e t o c r e d i t r i s k. T h i s i s p r i m a r i l y due t o t he h i gh r a t e of d e f a u l t s o n l o a n s a n d t he c o l l at e r a l s u ppor t i ng t h e VIE notes, r e s u l t i ng i n d e pr e s s e d pr i c i ng of t h e f i n a n c ia l i n s t r u m e n t s.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13537-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13433-108611 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=25499696&loc=d3e19207-110258 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13504-108611 + Details
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