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Fair Value Of Financial Instruments | 12 Months Ended
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Dec. 31, 2016
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Fair Value Measurement | Note 7: Fair Value of Financial Instruments Fair Value Measurement Financial Assets Financial 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, along with its third-party portfolio manager, reviews the assumptions, inp uts and methodologies used by pricing services and brokers to obtain reason able assurance that the prices used in its valuations reflect fair value. When the Company and its third-party portfolio manager believe a third-party quotation differs significantl y 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 yie ld 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 provide r does not update its price, and the Company still does not agree with the price provided, its third-party portfolio manager will obtain a price from another third-party provider or use an internally developed price which it believes represents the fair va lue 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, 2016 or 2015. All challenges to third-party prices are reviewed by staff of the Company as well as its third-party portfolio manager with relevant expertise to ensure reasonableness of assumptions. A pricing analysis is reviewed and approved by the Company’s v aluation c ommittee. Financial Liabilities (excludi ng derivative liabilities) Financial liabilities, excluding derivative liabilities, issued by the Company primarily consist of debt issued for general corporate purposes within its corporate segment, MTNs, investment agreements, debt issued by consolidated VIEs and warrants. 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-part y’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 Liabilities The Company’s derivative liabilities are primar ily interest rate swaps and insured credit derivatives. 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. Thi s 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 performed by internal staff with relevant expertise. When market spreads or securities prices are observable for similar transactions, those spreads are an integral part of the analysis. Internal Review Process All significant financial assets and liabilities are reviewed by the valuation committee to ensure compliance with the Company’s policies and risk procedures in the development of fair values of financial assets and liabilities. Th e valuation committee rev iew s, among other things, key assumptions used for internally developed prices, significant changes in sources and uses of inputs, including changes in model approaches, and any adjustments from third-party inputs or prices to internally developed inputs o r prices. The committee also review s any significant impairment or improvements in fair values of the financial instruments from prior periods. The committee is comprised of senior finance team members with relevant experience in the financial instruments their committee is responsible for. T he committee document s its agreement with the fair value measurements reported in the Company’s consolidated financial statements. Valuation Techniques Valuation techniques for financial instruments measured at fair val ue or disclosed at fair value are described below. Fixed-Maturity Securities (including short-term investments) Held as Available-For-Sale, Investments Carried at Fair Value, Investments Pledged as Collateral, Investments Held-to-Maturity, and Other Invest ments These investments include investments in U.S. Treasury and government agencies, state and municipal bonds, foreign governments, corporate obligations, MB S, ABS, money market securities, and perpetual debt and equity securities. These investments a re 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 a nd unobservable inputs. Inputs vary depending on the type of investment. Observable inputs include contractual cash flows, interest 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 inputs include cash flow projections and the value of any credit enhancement. The investment in the fixed-income fund was measured at fair value as of December 31, 2016 by applying the net asset value per share practical expedient. The investment in the fixed-i ncome fund may be redeemed on a quarterly basis with prior redemption notification of ninety days subject to withdrawal limitat ions. The investment is required to be held for a minimum of twelve months, and any subsequent quarterly redemption is limited to 25% of the investment or a complete redemption over four consecutive quarters in the amounts of 25%, 33%, 50%, and 100% of th e remaining investment balance as of the first, second, third and fourth consecutive quarters, respectively. The fair value of the held-to-maturity (“HTM”) investments is determined using discounted cash flow models. Key inputs include unobservable cash flows projected over the expected term of the investment 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 fai r value hierarchy. Level 1 investments generally consist of U.S. Treasury and government agency, foreign government, money market securities and perpetual debt and equity securities. 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 observable, such as interest rate yield curves, are categorized in Level 2 of the fair value hierarchy. Investments t hat contain significant inputs that are not observable are categorized as Level 3. Cash and Cash Equivalents, Receivable for Investments Sold, Securities Sold, Not Yet Purchased, Payable for Investments Purchased, and Accrued Investment Income The carrying amounts of cash and cash equivalents, receivable for investments sold, securities sold, not yet purchased, payable for investments purchased, and accrued investment income approximate fair values due to the short-term nature and credit worthiness of these instruments. These items are categorized 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 residential mortgage, corporate and co mmercial loans. Fair values of residential mortgage loans are determined using quoted prices for MBS issued by the respective VIE and adjusted for the fair values of the financial guarantees provided by MBIA Corp. on the related MBS. Fair values of corpora te and commercial loans are either obtained from a pricing service and determined using actively quoted prices obtained from multiple market participants, or based on discounted cash flow methodologies. Loans receivable at fair value are categorized in Lev el 3 of the fair value hierarchy based on an unobservable input that is significant to the fair value measurement in its entirety. Loan Repurchase Commitments Loan repurchase commitments are obligations owed by the sellers/servicers of mortgage loans to MB IA as reimbursement of paid claims. Loan 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 mort gage 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/servic ers to MBIA as reimbursement of paid claims. Loan repurchase commitments are not securities and no quoted prices or comparable market transaction information are observable or available. Fair values of loan repurchase commitments are determined using disco unted cash flow techniques and are categorized in Level 3 of the fair value hierarchy. Long-term Debt The fair value of long-term notes, debentures and surplus notes are estimated based on quoted prices for the se or similar securities. The fair value of th e accrued interest 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 repaym ent of the surplus notes is based on recent trades of the surplus notes. The carrying amounts of accrued interest expense on all other long-term debt approximate fair value due to the short-term nature of the interest payment. Long-term debt is categoriz ed in Level 2 of the fair value hierarchy. Medium-t erm Notes The fair values of certain MTNs are based on quoted market prices provided by third-pa rty sources, where available. When quoted market prices are not available, the Company applies a matrix pricing grid to determine fair value based on the quoted market prices received for similar instruments and considering the MTNs’ stated maturity and in terest rate. Nonperformance risk is included in the quoted market prices and the matrix pricing grid. The Company has elected to measure certain MTNs at fair value on a recurring basis with changes in fair value reflected in earnings. MTNs are categorized in Level 3 of the fair value hierarchy. 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 ag reements with comparable maturity dates. Investment agreements contain collateralization 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 cont ractual cash flows are not observable, these investment agreements are categorized in Level 3 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 pr ices 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, inc luding 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 fa ir 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 over-the-counter (“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 based on the lowest level 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 val uation models based on observable inputs, nonperformance risk of the Company 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. Derivatives—Insurance The derivative contracts insured by the Company cannot be legally traded and generall y do not have observable market prices. The Company determines the fair values of insured credit derivatives using valuation models based on observable inputs and considering nonperformance risk of the Company. The valuation models are applied consistently from period to period, with refinements to the valuation technique being applied as and when the information becomes available. Negotiated settlements are also considered to validate the valuation models and to reflect assumptions the Company believes market participant s would use. Approximately 97% of the balance sheet fair value of insured credit derivatives as of December 31, 2016 was valued based on the Binomial Expansion Technique (“BET”) Model. Approximately 3% of the balance sheet fair value of insured credit derivatives as of December 31, 2016 was valued based on the internally developed Direct Price Model and the Dual Default model. The valuation of insured derivatives includes the impact of its credit standing. The insured credit derivatives are categorized as Level 3 of the fair value hierarchy based on unobservable inputs that are significant to th e fair value measurement in its entirety. 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-implied default risk of the underlying co llateral 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 tranche s of the capital structure, credit spreads, recovery rates and nonperformance risk and weighted average life. As of December 31, 2016 and 2015, the Company’s net insured CDS derivative liability was $64 million and $85 milli on, 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 derivative liability that was $11 million and $99 million lower than the net liability that would have been estimated if MBIA Corp. excluded nonperformance risk in its valuation as of December 31, 2016 and 2015, respectively. The Company has also e ntered 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 usi ng observable discount rates and CDS spreads. Warrants Stock warrants issued by the Company are valued using the Black-Scholes model and are recorded at fair value. Inputs into the warrant valuation include the Company’s stock price, a volatility paramete r, interest rates, and dividend data. As all significant inputs are market-based and observable, warrants are categorized in Level 2 of the fair value hierarchy. Held For Sale As of December 31, 2016, the Company estimated the fair value of the assets and liabilities of MBIA UK held for sale based on the fair value of the expected total consideration for the sale of MBIA UK. The fair value of the sale consideration is categorize d in Level 2 of the fair value hierarchy. Refer to “Note 1: Business Developments and Risks and Uncertainties” for additional information about the sale of MBIA UK. Financial Guarantees Gross Financial Guarantees —The fair value of gross financial guaran tees is determined using discounted cash flow techniques 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 pol icies 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 car rying value of the Company’s gross financial guarantees 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 applying 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 r ecoverable 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, 2016 and 2015. These tables exclude inputs used to measure fair value that are not developed by the Company, such as broker prices and other third-party pricing service valuations.
|  |  | Fair Value |  |  |  |  |  |
|  |  | as of |  |  |  |  |  | Range
|  |  | December 31, |  |  |  |  |  | (Weighted
In millions |  | 2016 |  | Valuation Techniques |  | Unobservable Input |  | Average)
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |
| Loans receivable at fair value |  | $ | 916 |  | Market prices adjusted for financial |  | Impact of financial guarantee |  | 0% - 28% (3%)
|  |  |  |  |  | guarantees provided to VIE obligations |  |  |  |
|  |  |  |  |  | Discounted cash flow |  | Multiples(1) |  |
| Loan repurchase commitments |  |  | 404 |  | Discounted cash flow |  | Recovery rates(2) |  |
|  |  |  |  |  |  |  | Breach rates(2) |  |
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |
| Variable interest entity notes |  |  | 476 |  | Market prices of VIE assets |  | Impact of financial guarantee |  | 0% - 54% (24%)
|  |  |  |  |  | adjusted for financial guarantees provided |  |  |  |
Credit derivative liabilities, net: |  |  |  |  |  |  |  |  |
| CMBS |  |  | 62 |  | BET Model |  | Recovery rates |  | 25% - 40% (33%)
|  |  |  |  |  |  |  | Nonperformance risk |  | 10% - 32% (32%)
|  |  |  |  |  |  |  | Weighted average life (in years) |  | 1.1 - 1.5 (1.3)
|  |  |  |  |  |  |  | CMBS spreads |  | 25% - 35% (30%)
| Multi-sector CDO |  |  | 2 |  | Direct Price Model |  | Nonperformance risk |  | 58% - 58% (58%)
Other derivative liabilities |  |  | 20 |  | Discounted cash flow |  | Cash flows |  | $0 - $83 ($42)(3)
____________ |  |  |  |  |
(1) - Unobservable inputs are not developed by the Company.
(2) - Recovery rates and breach rates include estimates about potential variations in the outcome of litigation with a counterparty.
(3) - Midpoint of cash flows are used for the weighted average.
|  |  | Fair Value |  |  |  |  |  |
|  |  | as of |  |  |  |  |  | Range
|  |  | December 31, |  |  |  |  |  | (Weighted
In millions |  | 2015 |  | Valuation Techniques |  | Unobservable Input |  | Average)
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |
| Loans receivable at fair value |  | $ | 1,292 |  | Market prices adjusted for financial |  | Impact of financial guarantee |  | 0% - 5% (1%)
|  |  |  |  |  | guarantees provided to VIE obligations |  |  |  |
| Loan repurchase commitments |  |  | 396 |  | Discounted cash flow |  | Recovery rates(1) |  |
|  |  |  |  |  |  |  | Breach rates(1) |  |
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |
| Variable interest entity notes |  |  | 1,267 |  | Market prices of VIE assets |  | Impact of financial guarantee |  | 0% - 37% (14%)
|  |  |  |  |  | adjusted for financial guarantees provided |  |  |  |
Credit derivative liabilities, net: |  |  |  |  |  |  |  |  |
| CMBS |  |  | 72 |  | BET Model |  | Recovery rates |  | 25% - 90% (66%)
|  |  |  |  |  |  |  | Nonperformance risk |  | 33% - 55% (54%)
|  |  |  |  |  |  |  | Weighted average life (in years) |  | 1.1 - 3.2 (1.6)
|  |  |  |  |  |  |  | CMBS spreads |  | 0% - 59% (19%)
| Multi-sector CDO |  |  | 3 |  | Direct Price Model |  | Nonperformance risk |  | 59% - 59% (59%)
| Other |  |  | 10 |  | BET Model and Dual Default |  | Recovery rates |  | 42% - 45% (43%)
|  |  |  |  |  |  |  | Nonperformance risk |  | 59% - 59% (59%)
|  |  |  |  |  |  |  | Weighted average life (in years) |  | 0.5 - 7.3 (1.9)
Other derivative liabilities |  |  | 18 |  | 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.
Sensitivity of Significant Unobservable Inputs The significant unobservable input s used in the fair value measurement of the Company’s loans receivable at fair value of consolidated VIEs are t he impact of the financial guarantee and multiples. The fair value of loans receivable are calculated by subtracting the value of the financial guarantee from the market value of VIE liabilities and by discounted cash flow methodologies. The value of a financial guarantee is estimated by the Company as th e 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 fa ir 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. Re covery 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 that 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 r esult 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 signifi cantly impact the fair value measurement. Any significant challenges by the counterparties to the Company’s determination of breaches of representations and warranties could have a material adverse impact on the fair value measurement. Reco very rates and breach 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 the 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 expec ted 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 liab ilities of the VIE. The significant unobservable inputs used in the fair value measurement of MBIA Corp.’s commercial mortgage-backed securities (“CMBS”) credit derivatives, which are valued using the BET Model, are CMBS spreads, recovery rates, nonperform ance 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 potenti al loss. The nonperformance risk is an assumption of MBIA Corp.’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 prin cipal of the underlying collateral of the CMBS structure will 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 weigh ted 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 nonperformanc e risk would result in a decrease or increase in the fair value of the derivative liabilities, respectively. CMBS spreads, recovery rates, nonperformance risk and weighted average lives are determined independently. Changes in one input will not necessaril y have any impact on the other inputs. The significant unobservable 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 whether 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 in crease in the fair value of the derivative liabilities, respectively. 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 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 Co rp.’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 MBIA Corp.’s estimate of when the principal of the underlying collateral will be repaid. A signific ant 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 C orp.’s nonperformance risk would result in a decrease or increase 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 nece ssarily have any impact on the other inputs. The significant unobservable 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 usin g 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 val ue of the Company’s assets (including short-term investments) and liabilities measured and reported at fair value on a recurring basis as of December 31, 2016 and 2015:
|  |  |  |  |  | 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 |  | 2016 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed-maturity investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| U.S. Treasury and government agency |  | $ | 825 |  | $ | 112 |  | $ | - |  |  | $ | - |  | $ | 937 |
| State and municipal bonds |  |  | - |  |  | 1,440 |  |  | - |  |  |  | - |  |  | 1,440 |
| Foreign governments |  |  | - |  |  | 9 |  |  | - |  |  |  | - |  |  | 9 |
| Corporate obligations |  |  | - |  |  | 1,332 |  |  | 2 | (1) |  |  | - |  |  | 1,334 |
| Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Residential mortgage-backed agency |  |  | - |  |  | 868 |  |  | - |  |  |  | - |  |  | 868 |
|  | Residential mortgage-backed non-agency |  |  | - |  |  | 45 |  |  | - |  |  |  | - |  |  | 45 |
|  | Commercial mortgage-backed |  |  | - |  |  | 43 |  |  | - |  |  |  | - |  |  | 43 |
| Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Collateralized debt obligations |  |  | - |  |  | 7 |  |  | 15 | (1) |  |  | - |  |  | 22 |
|  | Other asset-backed |  |  | - |  |  | 257 |  |  | 44 | (1) |  |  | - |  |  | 301 |
|  |  | Total fixed-maturity investments |  |  | 825 |  |  | 4,113 |  |  | 61 |  |  |  | - |  |  | 4,999 |
Money market securities |  |  | 521 |  |  | - |  |  | - |  |  |  | - |  |  | 521 |
Perpetual debt and equity securities |  |  | 26 |  |  | 9 |  |  | - |  |  |  | - |  |  | 35 |
Fixed-income fund |  |  | - |  |  | - |  |  | - |  |  |  | - |  |  | 75 | (2)
Cash and cash equivalents |  |  | 163 |  |  | - |  |  | - |  |  |  | - |  |  | 163 |
Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Non-insured derivative assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Interest rate derivatives |  |  | - |  |  | 3 |  |  | - |  |  |  | - |  |  | 3 |
|  |  |  |  |  | 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 |  | 2016 |
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Corporate obligations |  |  | - |  |  | 27 |  |  | - |  |  |  | - |  |  | 27 |
| Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Residential mortgage-backed non-agency |  |  | - |  |  | 149 |  |  | - |  |  |  | - |  |  | 149 |
|  | Commercial mortgage-backed |  |  | - |  |  | 52 |  |  | - |  |  |  | - |  |  | 52 |
| Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Collateralized debt obligations |  |  | - |  |  | 7 |  |  | 1 | (1) |  |  | - |  |  | 8 |
|  | Other asset-backed |  |  | - |  |  | 18 |  |  | 1 | (1) |  |  | - |  |  | 19 |
| Cash |  |  | 24 |  |  | - |  |  | - |  |  |  | - |  |  | 24 |
| Loans receivable at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Residential loans receivable |  |  | - |  |  | - |  |  | 916 |  |  |  | - |  |  | 916 |
|  | Other loans receivable |  |  | - |  |  | - |  |  | 150 | (1) |  |  | - |  |  | 150 |
| Loan repurchase commitments |  |  | - |  |  | - |  |  | 404 |  |  |  | - |  |  | 404 |
| Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Currency derivatives |  |  | - |  |  | - |  |  | 19 | (1) |  |  | - |  |  | 19 |
Total assets |  | $ | 1,559 |  | $ | 4,378 |  | $ | 1,552 |  |  | $ | - |  | $ | 7,564 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Medium-term notes |  | $ | - |  | $ | - |  | $ | 101 | (1) |  | $ | - |  | $ | 101 |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Insured derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Credit derivatives |  |  | - |  |  | 2 |  |  | 64 |  |  |  | - |  |  | 66 |
| Non-insured derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Interest rate derivatives |  |  | - |  |  | 213 |  |  | - |  |  |  | - |  |  | 213 |
|  | Other |  |  | - |  |  | - |  |  | 20 |  |  |  | - |  |  | 20 |
Other liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Warrants |  |  | - |  |  | 33 |  |  | - |  |  |  | - |  |  | 33 |
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Variable interest entity notes |  |  | - |  |  | 875 |  |  | 476 |  |  |  | - |  |  | 1,351 |
Total liabilities |  | $ | - |  | $ | 1,123 |  | $ | 661 |  |  | $ | - |  | $ | 1,784 |
____________ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(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. |
(2) - Represents an investment that was measured at fair value by applying the net asset value per share practical expedient, and was not required to be classified in the fair value hierarchy. |
|  |  |  |  |  | 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 |  | 2015 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed-maturity investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| U.S. Treasury and government agency |  | $ | 866 |  | $ | 110 |  | $ | - |  |  | $ | - |  | $ | 976 |
| State and municipal bonds |  |  | - |  |  | 1,685 |  |  | 41 | (1) |  |  | - |  |  | 1,726 |
| Foreign governments |  |  | 153 |  |  | 43 |  |  | 2 | (1) |  |  | - |  |  | 198 |
| Corporate obligations |  |  | - |  |  | 1,450 |  |  | 7 | (1) |  |  | - |  |  | 1,457 |
| Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Residential mortgage-backed agency |  |  | - |  |  | 993 |  |  | - |  |  |  | - |  |  | 993 |
|  | Residential mortgage-backed non-agency |  |  | - |  |  | 51 |  |  | - |  |  |  | - |  |  | 51 |
|  | Commercial mortgage-backed |  |  | - |  |  | 31 |  |  | - |  |  |  | - |  |  | 31 |
| Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Collateralized debt obligations |  |  | - |  |  | 5 |  |  | 29 | (1) |  |  | - |  |  | 34 |
|  | Other asset-backed |  |  | - |  |  | 281 |  |  | 38 | (1) |  |  | - |  |  | 319 |
|  |  | Total fixed-maturity investments |  |  | 1,019 |  |  | 4,649 |  |  | 117 |  |  |  | - |  |  | 5,785 |
Money market securities |  |  | 354 |  |  | - |  |  | - |  |  |  | - |  |  | 354 |
Perpetual debt and equity securities |  |  | 18 |  |  | 17 |  |  | - |  |  |  | - |  |  | 35 |
Fixed-income funds |  |  | - |  |  | - |  |  | - |  |  |  | - |  |  | 173 | (2)
Cash and cash equivalents |  |  | 464 |  |  | - |  |  | - |  |  |  | - |  |  | 464 |
Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Non-insured derivative assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Interest rate derivatives |  |  | - |  |  | 4 |  |  | - |  |  |  | (1) |  |  | 3 |
|  |  |  |  |  | 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 |  | 2015 |
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Corporate obligations |  |  | - |  |  | 39 |  |  | 11 | (1) |  |  | - |  |  | 50 |
| Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Residential mortgage-backed non-agency |  |  | - |  |  | 172 |  |  | - |  |  |  | - |  |  | 172 |
|  | Commercial mortgage-backed |  |  | - |  |  | 672 |  |  | - |  |  |  | - |  |  | 672 |
| Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Collateralized debt obligations |  |  | - |  |  | 13 |  |  | 1 | (1) |  |  | - |  |  | 14 |
|  | Other asset-backed |  |  | - |  |  | 18 |  |  | 6 | (1) |  |  | - |  |  | 24 |
| Cash |  |  | 58 |  |  | - |  |  | - |  |  |  | - |  |  | 58 |
| Loans receivable at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Residential loans receivable |  |  | - |  |  | - |  |  | 1,185 |  |  |  | - |  |  | 1,185 |
|  | Other loans receivable |  |  | - |  |  | - |  |  | 107 |  |  |  | - |  |  | 107 |
| Loan repurchase commitments |  |  | - |  |  | - |  |  | 396 |  |  |  | - |  |  | 396 |
| Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Currency derivatives |  |  | - |  |  | - |  |  | 11 | (1) |  |  | - |  |  | 11 |
Total assets |  | $ | 1,913 |  | $ | 5,584 |  | $ | 1,834 |  |  | $ | (1) |  | $ | 9,503 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Medium-term notes |  | $ | - |  | $ | - |  | $ | 161 | (1) |  | $ | - |  | $ | 161 |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Insured derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Credit derivatives |  |  | - |  |  | 3 |  |  | 85 |  |  |  | - |  |  | 88 |
| Non-insured derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Interest rate derivatives |  |  | - |  |  | 240 |  |  | - |  |  |  | (32) |  |  | 208 |
|  | Other |  |  | - |  |  | - |  |  | 18 |  |  |  | - |  |  | 18 |
Other liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Warrants |  |  | - |  |  | 18 |  |  | - |  |  |  | - |  |  | 18 |
| Securities sold, not yet purchased |  |  | 18 |  |  | - |  |  | - |  |  |  | - |  |  | 18 |
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Variable interest entity notes |  |  | - |  |  | 1,095 |  |  | 1,267 |  |  |  | - |  |  | 2,362 |
| Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Interest rate derivatives |  |  | - |  |  | 45 |  |  | - |  |  |  | - |  |  | 45 |
Total liabilities |  | $ | 18 |  | $ | 1,401 |  | $ | 1,531 |  |  | $ | (32) |  | $ | 2,918 |
____________ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(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. |
(2) - Represents investments that were measured at fair value by applying the net asset value per share practical expedient, and were not required to be classified in the fair value hierarchy. |
Level 3 assets at fair value as of December 31, 2016 and 2015 represented approximately 21% and 19%, respectively, of total assets measured at fair value. Level 3 liabilities at fair value as of December 31, 2016 and 2015 represented approximately 37% and 52%, 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, 2016 and 2015:
|  |  | 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) |  | 2016 |  | 2016 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Other investments |  | $ | - |  | $ | 2 |  | $ | - |  | $ | 2 |  | $ | 3 |
| Assets held for sale |  |  | - |  |  | 306 |  |  | - |  |  | 306 |  |  | 306 |
| Accrued investment income(1) |  |  | - |  |  | 40 |  |  | - |  |  | 40 |  |  | 40 |
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Investments held-to-maturity |  |  | - |  |  | - |  |  | 876 |  |  | 876 |  |  | 890 |
Total assets |  | $ | - |  | $ | 348 |  | $ | 876 |  | $ | 1,224 |  | $ | 1,239 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Long-term debt |  | $ | - |  | $ | 1,030 |  | $ | - |  | $ | 1,030 |  | $ | 1,986 |
| Medium-term notes |  |  | - |  |  | - |  |  | 478 |  |  | 478 |  |  | 794 |
| Investment agreements |  |  | - |  |  | - |  |  | 508 |  |  | 508 |  |  | 399 |
| Payable for investments purchased(2) |  |  | - |  |  | 32 |  |  | - |  |  | 32 |  |  | 32 |
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Variable interest entity notes |  |  | - |  |  | - |  |  | 882 |  |  | 882 |  |  | 890 |
Total liabilities |  | $ | - |  | $ | 1,062 |  | $ | 1,868 |  | $ | 2,930 |  | $ | 4,101 |
Financial Guarantees: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Gross |  | $ | - |  | $ | - |  | $ | 2,638 |  | $ | 2,638 |  | $ | 995 |
| Ceded |  |  | - |  |  | - |  |  | 18 |  |  | 18 |  |  | 43 |
__________ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(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) |  | 2015 |  | 2015
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Other investments |  | $ | - |  | $ | - |  | $ | 3 |  | $ | 3 |  | $ | 3
| Accrued investment income(1) |  |  | - |  |  | 38 |  |  | - |  |  | 38 |  |  | 38
| Receivable for investments sold(1) |  |  | - |  |  | 26 |  |  | - |  |  | 26 |  |  | 26
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Investments held-to-maturity |  |  | - |  |  | - |  |  | 2,401 |  |  | 2,401 |  |  | 2,689
Total assets |  | $ | - |  | $ | 64 |  | $ | 2,404 |  | $ | 2,468 |  | $ | 2,756
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Long-term debt |  | $ | - |  | $ | 762 |  | $ | - |  | $ | 762 |  | $ | 1,889
| Medium-term notes |  |  | - |  |  | - |  |  | 534 |  |  | 534 |  |  | 855
| Investment agreements |  |  | - |  |  | - |  |  | 595 |  |  | 595 |  |  | 462
| Payable for investments purchased(2) |  |  | - |  |  | 36 |  |  | - |  |  | 36 |  |  | 36
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Variable interest entity notes |  |  | - |  |  | - |  |  | 2,596 |  |  | 2,596 |  |  | 2,689
Total liabilities |  | $ | - |  | $ | 798 |  | $ | 3,725 |  | $ | 4,523 |  | $ | 5,931
Financial Guarantees: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Gross |  | $ | - |  | $ | - |  | $ | 3,093 |  | $ | 3,093 |  | $ | 1,530
| Ceded |  |  | - |  |  | - |  |  | 94 |  |  | 94 |  |  | 56
__________ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(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, 2016 and 2015:
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Year Ended December 31, 2016
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 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 |  | 2016
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign governments |  | $ | 2 |  | $ | - |  | $ | - |  | $ | - |  | $ | (1) |  | $ | 10 |  | $ | - |  | $ | (10) |  | $ | - |  | $ | - |  | $ | (1) |  | $ | - |  | $ | -
Corporate obligations |  |  | 7 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 2 |  |  | (7) |  |  | 2 |  |  | -
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
mortgage-backed |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (1) |  |  | 1 |  |  | - |  |  | - |  |  | -
Collateralized debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
obligations |  |  | 29 |  |  | - |  |  | - |  |  | 18 |  |  | - |  |  | - |  |  | - |  |  | (32) |  |  | - |  |  | - |  |  | - |  |  | 15 |  |  | -
Other asset-backed |  |  | 38 |  |  | (1) |  |  | (1) |  |  | 14 |  |  | - |  |  | - |  |  | - |  |  | (3) |  |  | - |  |  | - |  |  | (3) |  |  | 44 |  |  | (1)
State and municipal |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
bonds |  |  | 41 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 122 |  |  | - |  |  | (39) |  |  | (1) |  |  | 2 |  |  | (125) |  |  | - |  |  | -
Assets of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate obligations |  |  | 11 |  |  | - |  |  | (6) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (2) |  |  | - |  |  | 2 |  |  | (5) |  |  | - |  |  | -
Residential mortgage- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
backed non-agency |  |  | - |  |  | - |  |  | (1) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 1 |  |  | - |  |  | - |  |  | -
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
mortgage-backed |  |  | - |  |  | - |  |  | (4) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 4 |  |  | - |  |  | - |  |  | -
Collateralized debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
obligations |  |  | 1 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 1 |  |  | -
Other asset-backed |  |  | 6 |  |  | - |  |  | (7) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 5 |  |  | (3) |  |  | 1 |  |  | -
Loans receivable- residential |  |  | 1,185 |  |  | - |  |  | (11) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (258) |  |  | - |  |  | - |  |  | - |  |  | 916 |  |  | (11)
Loans receivable-other |  |  | 107 |  |  | - |  |  | 4 |  |  | - |  |  | - |  |  | 146 |  |  | - |  |  | - |  |  | (107) |  |  | - |  |  | - |  |  | 150 |  |  | 4
Loan repurchase |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
commitments |  |  | 396 |  |  | - |  |  | 8 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 404 |  |  | 8
Currency |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
derivatives net |  |  | 11 |  |  | - |  |  | 2 |  |  | - |  |  | 6 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 19 |  |  | 8
Total assets |  | $ | 1,834 |  | $ | (1) |  | $ | (16) |  | $ | 32 |  | $ | 5 |  | $ | 278 |  | $ | - |  | $ | (344) |  | $ | (109) |  | $ | 17 |  | $ | (144) |  | $ | 1,552 |  | $ | 8
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 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 |  | 2016
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Medium-term notes |  | $ | 161 |  | $ | - |  | $ | (3) |  | $ | - |  | $ | (1) |  | $ | - |  | $ | - |  | $ | (56) |  | $ | - |  | $ | - |  | $ | - |  | $ | 101 |  | $ | (4)
Credit derivatives, net |  |  | 85 |  |  | 43 |  |  | (21) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (43) |  |  | - |  |  | - |  |  | - |  |  | 64 |  |  | (13)
Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
derivatives, net |  |  | 18 |  |  | - |  |  | 2 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 20 |  |  | 2
Liabilities of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
VIE notes |  |  | 1,267 |  |  | - |  |  | (23) |  |  | - |  |  | - |  |  | 9 |  |  | - |  |  | (146) |  |  | (631) |  |  | - |  |  | - |  |  | 476 |  |  | (23)
Total liabilities |  | $ | 1,531 |  | $ | 43 |  | $ | (45) |  | $ | - |  | $ | (1) |  | $ | 9 |  | $ | - |  | $ | (245) |  | $ | (631) |  | $ | - |  | $ | - |  | $ | 661 |  | $ | (38)
_______________ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(1) - Transferred in and out at the end of the period.
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Year Ended December 31, 2015
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 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 |  | 2015
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign governments |  | $ | 6 |  | $ | - |  | $ | - |  | $ | - |  | $ | (1) |  | $ | - |  | $ | - |  | $ | - |  | $ | (3) |  | $ | - |  | $ | - |  | $ | 2 |  | $ | -
Corporate obligations |  |  | 10 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 20 |  |  | (23) |  |  | 7 |  |  | -
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
mortgage-backed |  |  | 2 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (2) |  |  | - |  |  | -
Collateralized debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
obligations |  |  | 87 |  |  | - |  |  | - |  |  | 3 |  |  | - |  |  | - |  |  | - |  |  | (50) |  |  | (8) |  |  | 1 |  |  | (4) |  |  | 29 |  |  | -
Other asset-backed |  |  | 85 |  |  | (2) |  |  | - |  |  | (5) |  |  | - |  |  | 4 |  |  | - |  |  | (9) |  |  | (21) |  |  | 12 |  |  | (26) |  |  | 38 |  |  | -
State and municipal |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
bonds |  |  | 8 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 45 |  |  | - |  |  | (10) |  |  | - |  |  | - |  |  | (2) |  |  | 41 |  |  | -
Assets of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate obligations |  |  | 55 |  |  | - |  |  | (4) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (5) |  |  | - |  |  | 6 |  |  | (41) |  |  | 11 |  |  | -
Residential mortgage- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
backed non-agency |  |  | 3 |  |  | - |  |  | 1 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (1) |  |  | - |  |  | 2 |  |  | (5) |  |  | - |  |  | -
Collateralized debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
obligations |  |  | 5 |  |  | - |  |  | 5 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (1) |  |  | - |  |  | 1 |  |  | (9) |  |  | 1 |  |  | -
Other asset-backed |  |  | 26 |  |  | - |  |  | 2 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (9) |  |  | - |  |  | 1 |  |  | (14) |  |  | 6 |  |  | -
Loans receivable - residential |  |  | 1,431 |  |  | - |  |  | (13) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (233) |  |  | - |  |  | - |  |  | - |  |  | 1,185 |  |  | (13)
Loans receivable - other |  |  | - |  |  | - |  |  | (1) |  |  | - |  |  | - |  |  | 108 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 107 |  |  | (1)
Loan repurchase |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
commitments |  |  | 379 |  |  | - |  |  | 17 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 396 |  |  | 17
Currency derivatives, net |  |  | - |  |  | - |  |  | 4 |  |  | - |  |  | 7 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 11 |  |  | 11
Total assets |  | $ | 2,097 |  | $ | (2) |  | $ | 11 |  | $ | (2) |  | $ | 6 |  | $ | 157 |  | $ | - |  | $ | (318) |  | $ | (32) |  | $ | 43 |  | $ | (126) |  | $ | 1,834 |  | $ | 14
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 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 |  | 2015
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Medium-term notes |  | $ | 197 |  | $ | - |  | $ | (16) |  | $ | - |  | $ | (20) |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | 161 |  | $ | (36)
Credit derivatives, net |  |  | 244 |  |  | 28 |  |  | (159) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (28) |  |  | - |  |  | - |  |  | - |  |  | 85 |  |  | (145)
Other derivatives, net |  |  | 24 |  |  | - |  |  | (6) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 18 |  |  | (6)
Liabilities of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
VIE notes |  |  | 735 |  |  | - |  |  | (5) |  |  | - |  |  | - |  |  | 695 |  |  | - |  |  | (158) |  |  | - |  |  | - |  |  | - |  |  | 1,267 |  |  | (5)
Total liabilities |  | $ | 1,200 |  | $ | 28 |  | $ | (186) |  | $ | - |  | $ | (20) |  | $ | 695 |  | $ | - |  | $ | (186) |  | $ | - |  | $ | - |  | $ | - |  | $ | 1,531 |  | $ | (192)
_______________ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(1) - Transferred in and out at the end of the period.
F or the year ended December 31, 2016, t ransfers into Level 3 and out of Level 2 were principally related to other asset-backed, commercial mortgage-backed, corporate obligations, state and municipal bonds, and RMBS, where inputs, which are significant to their valuation, became unobservable during the period. C orporate obligations, other asset-backed, and state and municipal bonds, comprised the majority of the instruments transferred out of Level 3 where inputs, which are significant to their valuation, became o bservable 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. F or th e year ended December 31, 2015, t ransfers into Level 3 and out of Level 2 were principally related to corporate obligations and other ABS, where inputs, which are significant to their valuation, became unobservable during the period. Corporate oblig ations, other ABS and CDOs c omprised the majority of the instruments transferred out of Level 3 where inputs, which are significant to their valuation, became observable during the period. These inputs included spreads, prepayment speeds, default speeds, d efault 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 made 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, 2016, 2015 and 2014 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,
|  |  | 2016 |  | 2015 |  | 2014 |  | 2016 |  | 2015 |  | 2014
Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Unrealized gains (losses) on |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| insured derivatives |  | $ | 21 |  | $ | 159 |  | $ | 903 |  | $ | 13 |  | $ | 145 |  | $ | 20
| Realized gains (losses) and other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| settlements on insured derivatives |  |  | (43) |  |  | (28) |  |  | (445) |  |  | - |  |  | - |  |  | -
| Net gains (losses) on financial instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| at fair value and foreign exchange |  |  | 1 |  |  | 39 |  |  | 18 |  |  | 1 |  |  | 42 |  |  | 12
| Net investment losses related to |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| other-than-temporary impairments |  |  | (1) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
| Revenues of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Net gains (losses) on financial instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| at fair value and foreign exchange |  |  | 14 |  |  | 23 |  |  | (32) |  |  | 32 |  |  | 19 |  |  | 20
Total |  | $ | (8) |  | $ | 193 |  | $ | 444 |  | $ | 46 |  | $ | 206 |  | $ | 52
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, 2016, 2015 and 2014 for financial instruments for which the fair value option was elected:
|  |  |  | Years Ended December 31, |
| In millions |  | 2016 |  | 2015 |  | 2014 |
| Investments carried at fair value(1) |  | $ | 7 |  | $ | (3) |  | $ | 2 |
| Fixed-maturity securities held at fair value-VIE(2) |  |  | (124) |  |  | (146) |  |  | (104) |
| Loans receivable at fair value: |  |  |  |  |  |  |  |  |  |
|  | Residential mortgage loans(2) |  |  | (268) |  |  | (246) |  |  | (182) |
|  | Other loans(2) |  |  | - |  |  | - |  |  | 10 |
| Loan repurchase commitments(2) |  |  | 8 |  |  | 17 |  |  | 20 |
| Medium-term notes(1) |  |  | 4 |  |  | 36 |  |  | 6 |
| Variable interest entity notes (2) |  |  | 383 |  |  | 381 |  |  | 269 |
| ___________ |  |  |  |  |  |  |  |  |
| (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, 2016 an d 2015 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, 2016 |  |  | As of December 31, 2015
|  |  | Contractual |  |  |  |  |  |  |  | Contractual |  |  |  |  |  |
|  |  | Outstanding |  | Fair |  |  |  |  | Outstanding |  | Fair |  |  |
In millions |  | Principal |  | Value |  | Difference |  | Principal |  | Value |  | Difference
Loans receivable at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Residential mortgage loans |  | $ | 965 |  | $ | 894 |  | $ | 71 |  | $ | 1,260 |  | $ | 1,149 |  | $ | 111
| Residential mortgage loans (90 days or more past due) |  |  | 143 |  |  | 22 |  |  | 121 |  |  | 177 |  |  | 36 |  |  | 141
| Other loans |  |  | - |  |  | - |  |  | - |  |  | 107 |  |  | 107 |  |  | -
| Other loans (90 days or more past due) |  |  | 150 |  |  | 150 |  |  | - |  |  | 75 |  |  | - |  |  | 75
Total loans receivable at fair value |  |  | 1,258 |  |  | 1,066 |  |  | 192 |  |  | 1,619 |  |  | 1,292 |  |  | 327
Variable interest entity notes |  |  | 2,449 |  |  | 1,351 |  |  | 1,098 |  |  | 3,663 |  |  | 2,362 |  |  | 1,301
Medium-term notes |  |  | 158 |  |  | 101 |  |  | 57 |  |  | 217 |  |  | 161 |  |  | 56
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 years ended December 31, 2016 a nd 2015 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 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 2: 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 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 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13537-108611 Reference 5: 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=49121117&loc=d3e13504-108611 Reference 6: 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=49121117&loc=d3e13433-108611 + Details
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