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Fair Value Of Financial Instruments | 6 Months Ended
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Jun. 30, 2023
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Fair Value Of Financial Instruments | Note 6: Fair Value of Financial Instruments Fair Value Measurement Financial Assets and Liabilities Financial assets held by the Company primarily consist of investments in debt and equity securities and loans receivables at fair value held by consolidated VIEs. 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, and debt issued by consolidated VIEs. The Company’s derivative liabilities are primarily interest rate swaps. Valuation Techniques Valuation techniques for financial instruments measured at fair value are described below. Fixed-Maturity Securities Held as Available-For-Sale, Investments Carried at Fair Value, Investments Pledged as Collateral and Short-term Investments These investments include investments in U.S. Treasury and government agencies, state and municipal bonds, foreign governments, corporate obligations, MBS, ABS, money market securities, and equity investments. Substantially all of these investments are valued based on recently executed transaction prices or quoted market prices by independent third parties, including pricing services and brokers. 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, interest rate yield curves, credit default swap (“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, the value of any credit enhancement and for certain equity investments, EBITDA multiples, discount rates, hard asset values and type certificate values. 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 consist of U.S. Treasury and government agency, money market securities and equity 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 observable, 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 The carrying amounts of cash and cash equivalents approximate fair value due to the short-term nature and credit worthiness of these instruments and are categorized in Level 1 of the fair value hierarchy. Loans Receivable at Fair Value Loans receivable at fair value are assets held by consolidated VIEs consisting of residential mortgage loans and are categorized in Level 3 of the fair value hierarchy. Fair values of residential mortgage loans are determined using quoted prices for similar securities or internal cash flow models, adjusted for the fair values of the financial guarantees provided by MBIA Corp. on the related MBS. The fair values of the financial guarantees consider expected claim payments, net of recoveries, under MBIA Corp.’s policies. Other Assets Other assets include receivables representing the right to receive reimbursement payments on claim payments expected to be made on certain insured VIE liabilities due to risk mitigating transactions with third parties executed to effectively defease, or, in-substance commute the Company’s exposure on its financial guarantee policies. The right to receive reimbursement payments is based on the value of the Company’s financial guarantee determined using a cash flow model. The fair value of the financial guarantee primarily contains unobservable inputs and is categorized in Level 3 of the fair value hierarchy. Medium-term Notes at Fair Value The Company has elected to measure certain medium-term notes (“MTNs”) at fair value on a recurring basis. 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 pricing grid to determine fair value based on the quoted market prices received for similar instruments and considering the MTNs’ stated maturity and interest rate. Nonperformance risk is included in the quoted market prices and the matrix pricing grid. MTNs are categorized in Level 3 of the fair value hierarchy and do not include accrued interest. Variable Interest Entity Debt The fair values of VIE debt 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 or internal cash flow models. Fair values based on quoted prices of similar securities and internal cash flow models may be adjusted for factors unique to the securities, including any credit enhancement. Observable inputs include interest rate yield curves, bond spreads of similar securities and MBIA Corp.’s CDS spreads. Unobservable inputs include the value of any credit enhancement. VIE debt are categorized in 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 over-the-counter derivatives are determined using valuation 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 of the fair value hierarchy based on the lowest level input that is significant to the fair value measurement in its entirety. A VIE consolidated by the Company entered into a derivative instrument consisting of a cross currency swap. The cross currency swap was entered into to manage the variability in cash flows resulting from fluctuations in foreign currency rates. The fair value of the VIE derivative was determined based on the valuation provided by an independent third party, which is included in “Liabilities of consolidated variable interest entities – Derivative liabilities” on the Company’s consolidated balance sheets. As the significant inputs are unobservable, the derivative contract is categorized in Level 3 of the fair value hierarchy. 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 June 30, 2023 and December 31, 2022:
In millions |  | Fair Value as of June 30, 2023 |  | Valuation Techniques |  | Unobservable Input |  | Range (Weighted Average)
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Equity Investments |  | $ | 115 |  |  | Discounted cash flow |  | EBITDA multiples (1) |  |  |  |
|  |  |  |  |  |  |  | Discount rate (1) |  |  |  |
|  |  |  |  |  | Sum of the parts |  | Hard asset values (1) |  |  |  |
|  |  |  |  |  |  |  | Type certificate values (1) |  |  |  |
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |
Loans receivable at fair value |  |  | 70 |  |  | Market prices of similar liabilities or internal cash flow models adjusted for financial guarantees provided to VIE obligations |  | Impact of financial guarantee |  |  | 12% - 188%(85%) (2) |
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |
Variable interest entity notes |  |  | 183 |  |  | Market prices of VIE assets adjusted for financial guarantees provided or market prices of similar liabilities |  | Impact of financial guarantee |  |  | 72% - 72%(72%) (2) |
(1) | - Range for EBITDA multiples, discount rate, hard asset values and type certificate values reflects their potential variability.
(2) | - Weighted average represents the total MBIA guarantees as a percentage of total instrument fair value.
In millions |  | Fair Value as of December 31, 2022 |  | Valuation Techniques |  | Unobservable Input |  | Range (Weighted Average)
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Equity Investments |  | $ | 115 |  |  | Discounted cash flow |  | EBITDA multiples (1) |  |  |  |
|  |  |  |  |  |  |  | Discount rate (1) |  |  |  |
|  |  |  |  |  | Sum of the parts |  | Hard asset values (1) |  |  |  |
|  |  |  |  |  |  |  | Type certificate values (1) |  |  |  |
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |
Loans receivable at fair value |  |  | 78 |  |  | Market prices of similar liabilities or internal cash flow models adjusted for financial guarantees provided to VIE obligations |  | Impact of financial guarantee |  |  | 12% - 88%(52%) (2) |
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |
Variable interest entity notes |  |  | 172 |  |  | Market prices of VIE assets adjusted for financial guarantees provided or market prices of similar liabilities |  | Impact of financial guarantee |  |  | 34% - 82%(68%) (2) |
(1) | - Range for EBITDA multiples, discount rate, hard asset values and type certificate values reflects their potential variability.
(2) | - Weighted average represents the total MBIA guarantees as a percentage of total instrument fair value.
S ensitivity of Significant Unobservable Inputs The significant unobservable inputs used in the fair value measurement of the Company’s equity investments at fair value are EBITDA multiples, the discount rate, hard asset values and type certificate values. The fair value of equity investments is determined by taking a weighted average of valuation scenarios. If there had been lower or higher EBITDA multiples, hard asset values or type certificate values, the value of equity investments would have been lower or higher, respectively. If there had been a lower or higher discount rate, the value of equity investments would have been higher or lower, respectively. The significant unobservable input used in the fair value measurement of the Company’s residential loans receivable at fair value of consolidated VIEs is the impact of the financial guarantee. The fair value of residential loans receivable is calculated by subtracting the value of the financial guarantee from the market value of similar instruments to that of the VIE liabilities or the market value derived from internal cash flow models. The value of a financial guarantee is estimated by the Company as the present value of expected cash payments, net of recoveries, under the policy. If there had been a lower expected cash flow on the underlying loans receivable of the VIE, the value of the financial guarantee provided by the Company under the insurance policy would have been higher. This would have resulted in a lower fair value of the residential loans receivable in relation to the obligations of the VIE. 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. When the VIE note is backed by RMBS, the fair value of the VIE liability is calculated by applying the market value of similar instruments to that of the VIE liabilities or internal cash flow models. The value of a financial guarantee is estimated by the Company as the present value of expected cash payments under the policy. If the value of the guarantee provided by the Company to the obligations issued by the VIE had increased, the credit support would have added value to the liabilities of the VIE. This would have resulted in an increased fair value of the liabilities of the VIE. Fair Value Measurements The following tables present the fair value of the Company’s assets (including short-term investments) and liabilities measured and reported at fair value on a recurring basis as of June 30, 2023 and December 31, 2022:
|  | Fair Value Measurements at Reporting Date Using |  |
In millions |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Balance as of June 30, 2023
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed-maturity investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury and government agency |  | $ | 376 |  |  | $ | 55 |  |  | $ | - |  |  | $ | 431 |
State and municipal bonds |  |  | - |  |  |  | 127 |  |  |  | - |  |  |  | 127 |
Foreign governments |  |  | - |  |  |  | 24 |  |  |  | - |  |  |  | 24 |
Corporate obligations |  |  | - |  |  |  | 852 |  |  |  | 1 |  |  |  | 853 |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed agency |  |  | - |  |  |  | 199 |  |  |  | - |  |  |  | 199 |
Residential mortgage-backed non-agency |  |  | - |  |  |  | 56 |  |  |  | - |  |  |  | 56 |
Commercial mortgage-backed |  |  | - |  |  |  | 23 |  |  |  | - |  |  |  | 23 |
Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collateralized debt obligations |  |  | - |  |  |  | 161 |  |  |  | - |  |  |  | 161 |
Other asset-backed |  |  | - |  |  |  | 72 |  |  |  | - |  |  |  | 72 |
Total fixed-maturity investments |  |  | 376 |  |  |  | 1,569 |  |  |  | 1 |  |  |  | 1,946 |
Money market securities |  |  | 326 |  |  |  | - |  |  |  | - |  |  |  | 326 |
Equity investments |  |  | 39 |  |  |  | 19 |  |  |  | 115 |  |  |  | 173 |
Cash and cash equivalents |  |  | 208 |  |  |  | - |  |  |  | - |  |  |  | 208 |
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed non-agency |  |  | - |  |  |  | 11 |  |  |  | - |  |  |  | 11 |
Commercial mortgage-backed |  |  | - |  |  |  | 9 |  |  |  | - |  |  |  | 9 |
Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collateralized debt obligations |  |  | - |  |  |  | 1 |  |  |  | - |  |  |  | 1 |
Other asset-backed |  |  | - |  |  |  | 1 |  |  |  | - |  |  |  | 1 |
Cash |  |  | 7 |  |  |  | - |  |  |  | - |  |  |  | 7 |
Loans receivable at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential loans receivable |  |  | - |  |  |  | - |  |  |  | 70 |  |  |  | 70 |
Other assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other |  |  | - |  |  |  | - |  |  |  | 2 |  |  |  | 2 |
Total assets |  | $ | 956 |  |  | $ | 1,610 |  |  | $ | 188 |  |  | $ | 2,754 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Medium-term notes |  | $ | - |  |  | $ | - |  |  | $ | 38 |  |  | $ | 38 |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-insured interest rate derivatives |  |  | - |  |  |  | 48 |  |  |  | - |  |  |  | 48 |
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Variable interest entity notes |  |  | - |  |  |  | - |  |  |  | 183 |  |  |  | 183 |
Currency derivatives |  |  | - |  |  |  | - |  |  |  | 12 |  |  |  | 12 |
Total liabilities |  | $ | - |  |  | $ | 48 |  |  | $ | 233 |  |  | $ | 281 |
|  | Fair Value Measurements at Reporting Date Using |  |
In millions |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Balance as of December 31, 2022
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed-maturity investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury and government agency |  | $ | 463 |  |  | $ | 54 |  |  | $ | - |  |  | $ | 517 |
State and municipal bonds |  |  | - |  |  |  | 323 |  |  |  | - |  |  |  | 323 |
Foreign governments |  |  | - |  |  |  | 21 |  |  |  | - |  |  |  | 21 |
Corporate obligations |  |  | - |  |  |  | 797 |  |  |  | - |  |  |  | 797 |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed agency |  |  | - |  |  |  | 207 |  |  |  | - |  |  |  | 207 |
Residential mortgage-backed non-agency |  |  | - |  |  |  | 95 |  |  |  | - |  |  |  | 95 |
Commercial mortgage-backed |  |  | - |  |  |  | 24 |  |  |  | - |  |  |  | 24 |
Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collateralized debt obligations |  |  | - |  |  |  | 159 |  |  |  | - |  |  |  | 159 |
Other asset-backed |  |  | - |  |  |  | 127 |  |  |  | - |  |  |  | 127 |
Total fixed-maturity investments |  |  | 463 |  |  |  | 1,807 |  |  |  | - |  |  |  | 2,270 |
Money market securities |  |  | 234 |  |  |  | - |  |  |  | - |  |  |  | 234 |
Equity investments |  |  | 38 |  |  |  | 19 |  |  |  | 115 |  |  |  | 172 |
Cash and cash equivalents |  |  | 50 |  |  |  | - |  |  |  | - |  |  |  | 50 |
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate obligations |  |  | - |  |  |  | 4 |  |  |  | - |  |  |  | 4 |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed non-agency |  |  | - |  |  |  | 22 |  |  |  | - |  |  |  | 22 |
Commercial mortgage-backed |  |  | - |  |  |  | 9 |  |  |  | - |  |  |  | 9 |
Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collateralized debt obligations |  |  | - |  |  |  | 5 |  |  |  | - |  |  |  | 5 |
Other asset-backed |  |  | - |  |  |  | 7 |  |  |  | - |  |  |  | 7 |
Cash |  |  | 16 |  |  |  | - |  |  |  | - |  |  |  | 16 |
Loans receivable at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential loans receivable |  |  | - |  |  |  | - |  |  |  | 78 |  |  |  | 78 |
Other assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other |  |  | - |  |  |  | - |  |  |  | 23 |  |  |  | 23 |
Total assets |  | $ | 801 |  |  | $ | 1,873 |  |  | $ | 216 |  |  | $ | 2,890 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Medium-term notes |  | $ | - |  |  | $ | - |  |  | $ | 41 |  |  | $ | 41 |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-insured interest rate derivatives |  |  | - |  |  |  | 49 |  |  |  | - |  |  |  | 49 |
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Variable interest entity notes |  |  | - |  |  |  | - |  |  |  | 172 |  |  |  | 172 |
Currency derivatives |  |  | - |  |  |  | - |  |  |  | 6 |  |  |  | 6 |
Total liabilities |  | $ | - |  |  | $ | 49 |  |  | $ | 219 |  |  | $ | 268 |
Level 3 assets at fair value as of June 30, 2023 and December 31, 2022 represented approximately 7% of total assets measured at fair value. Level 3 liabilities at fair value as of June 30, 2023 and December 31, 2022 represented approximately 83% and 82%, respectively, of total liabilities measured at fair value. The following tables present the fair values and carrying values 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 June 30, 2023 and December 31, 2022. The majority of the financial assets and liabilities that the Company requires fair value reporting or disclosures are valued based on the Company’s or a third-party’s estimate of discounted cash flow model estimates, or quoted market values for identical or similar products.
|  | Fair Value Measurements at Reporting Date Using |  |  |  |
In millions |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Fair Value Balance as of June 30, 2023 |  | Carry Value Balance as of June 30, 2023
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Long-term debt |  | $ | - |  |  | $ | 269 |  |  | $ | - |  |  | $ | 269 |  |  | $ | 2,505 |
Medium-term notes |  |  | - |  |  |  | - |  |  |  | 284 |  |  |  | 284 |  |  |  | 455 |
Investment agreements |  |  | - |  |  |  | - |  |  |  | 259 |  |  |  | 259 |  |  |  | 236 |
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Variable interest entity loans payable |  |  | - |  |  |  | - |  |  |  | 3 |  |  |  | 3 |  |  |  | 3 |
Total liabilities |  | $ | - |  |  | $ | 269 |  |  | $ | 546 |  |  | $ | 815 |  |  | $ | 3,199 |
Financial Guarantees: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gross liability (recoverable) |  | $ | - |  |  | $ | - |  |  | $ | 820 |  |  | $ | 820 |  |  | $ | 510 |
Ceded recoverable (liability) |  |  | - |  |  |  | - |  |  |  | 21 |  |  |  | 21 |  |  |  | 8 |
|  | Fair Value Measurements at Reporting Date Using |  |  |  |
In millions |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Fair Value Balance as of December 31, 2022 |  | Carry Value Balance as of December 31, 2022
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Long-term debt |  | $ | - |  |  | $ | 330 |  |  | $ | - |  |  | $ | 330 |  |  | $ | 2,428 |
Medium-term notes |  |  | - |  |  |  | - |  |  |  | 310 |  |  |  | 310 |  |  |  | 458 |
Investment agreements |  |  | - |  |  |  | - |  |  |  | 257 |  |  |  | 257 |  |  |  | 233 |
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Variable interest entity loans payable |  |  | - |  |  |  | - |  |  |  | 2 |  |  |  | 2 |  |  |  | 2 |
Total liabilities |  | $ | - |  |  | $ | 330 |  |  | $ | 569 |  |  | $ | 899 |  |  | $ | 3,121 |
Financial Guarantees: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gross liability (recoverable) |  | $ | - |  |  | $ | - |  |  | $ | 864 |  |  | $ | 864 |  |  | $ | 568 |
Ceded recoverable (liability) |  |  | - |  |  |  | - |  |  |  | 21 |  |  |  | 21 |  |  |  | 15 |
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 three months ended June 30, 2023 and 2022: Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended June 30, 2023
In millions |  | Balance, Beginning of Period |  | Total Gains / (Losses) Included in Earnings |  | Unrealized Gains / (Losses) Included in OCI (1) |  | Purchases |  | Issuances |  | Settlements |  | Sales |  | Transfers into Level 3 |  | Transfers out of Level 3 |  | Ending Balance |  | Change in Unrealized Gains (Losses) for the Period Included in Earnings for Assets still held as of June 30, 2023 |  | Change in Unrealized Gains (Losses) for the Period Included in OCI for Assets still held as of June 30, 2023 (1)
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate obligations |  | $ | 1 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 1 |  |  | $ | - |  |  | $ | - |
Equity investments |  |  | 115 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 115 |  |  |  | - |  |  |  | - |
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans receivable - residential |  |  | 83 |  |  |  | (11 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (2 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 70 |  |  |  | (12 | ) |  |  | - |
Other |  |  | 9 |  |  |  | 2 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (9 | ) |  |  | - |  |  |  | - |  |  |  | 2 |  |  |  | (2 | ) |  |  | - |
Total assets |  | $ | 208 |  |  | $ | (9 | ) |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | (2 | ) |  | $ | (9 | ) |  | $ | - |  |  | $ | - |  |  | $ | 188 |  |  | $ | (14 | ) |  | $ | - |
In millions |  | Balance, Beginning of Period |  | Total (Gains) / Losses Included in Earnings |  | Unrealized (Gains) / Losses Included in OCI (2) |  | Purchases |  | Issuances |  | Settlements |  | Sales |  | Transfers into Level 3 |  | Transfers out of Level 3 |  | Ending Balance |  | Change in Unrealized (Gains) Losses for the Period Included in Earnings for Liabilities still held as of June 30, 2023 |  | Change in Unrealized (Gains) Losses for the Period Included in OCI for Liabilities still held as of June 30, 2023 (2)
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Medium-term notes |  | $ | 42 |  |  | $ | (3 | ) |  | $ | (1 | ) |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 38 |  |  | $ | (3 | ) |  | $ | (1 | )
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
VIE notes |  |  | 154 |  |  |  | 17 |  |  |  | (12 | ) |  |  | - |  |  |  | 62 |  |  |  | (22 | ) |  |  | (16 | ) |  |  | - |  |  |  | - |  |  |  | 183 |  |  |  | (5 | ) |  |  | 7 |
Currency derivatives |  |  | 11 |  |  |  | 1 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 12 |  |  |  | 1 |  |  |  | - |
Total liabilities |  | $ | 207 |  |  | $ | 15 |  |  | $ | (13 | ) |  | $ | - |  |  | $ | 62 |  |  | $ | (22 | ) |  | $ | (16 | ) |  | $ | - |  |  | $ | - |  |  | $ | 233 |  |  | $ | (7 | ) |  | $ | 6 |
(1) - | Reported within the “Unrealized gains (losses) on available-for-sale securities” on MBIA’s Consolidated Statement of Comprehensive Income/Loss.
(2) - | Reported within the “Instrument-specific credit risk of liabilities measured at fair value” on MBIA’s Consolidated Statement of Comprehensive Income/Loss.
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended June 30, 2022
In millions |  | Balance, Beginning of Period |  | Total Gains / (Losses) Included in Earnings |  | Unrealized Gains / (Losses) Included in OCI (1) |  | Purchases |  | Issuances |  | Settlements |  | Sales |  | Transfers into Level 3 |  | Transfers out of Level 3 |  | Ending Balance |  | Change in Unrealized Gains (Losses) for the Period Included in Earnings for Assets still held as of June 30, 2022 |  | Change in Unrealized Gains (Losses) for the Period Included in OCI for Assets still held as of June 30, 2022 (1)
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed non-agency |  | $ | 38 |  |  | $ | 1 |  |  | $ | (5 | ) |  | $ | 21 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 55 |  |  | $ | - |  |  | $ | (3 | )
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans receivable-residential |  |  | 76 |  |  |  | (6 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (2 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 68 |  |  |  | (8 | ) |  |  | - |
Currency derivatives |  |  | 9 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 9 |  |  |  | - |  |  |  | - |
Other |  |  | 15 |  |  |  | 1 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 16 |  |  |  | 1 |  |  |  | - |
Total assets |  | $ | 138 |  |  | $ | (4 | ) |  | $ | (5 | ) |  | $ | 21 |  |  | $ | - |  |  | $ | (2 | ) |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 148 |  |  | $ | (7 | ) |  | $ | (3 | )
In millions |  | Balance, Beginning of Period |  | Total (Gains) / Losses Included in Earnings |  | Unrealized (Gains) / Losses Included in OCI (2) |  | Purchases |  | Issuances |  | Settlements |  | Sales |  | Transfers into Level 3 |  | Transfers out of Level 3 |  | Ending Balance |  | Change in Unrealized (Gains) Losses for the Period Included in Earnings for Liabilities still held as of June 30, 2022 |  | Change in Unrealized (Gains) Losses for the Period Included in OCI for Liabilities still held as of June 30, 2022 (2)
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Medium-term notes |  | $ | 99 |  |  | $ | (13 | ) |  | $ | 3 |  |  | $ | - |  |  | $ | - |  |  | $ | (47 | ) |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 42 |  |  | $ | (12 | ) |  | $ | 5 |
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
VIE notes |  |  | 285 |  |  |  | (30 | ) |  |  | 18 |  |  |  | - |  |  |  | - |  |  |  | (56 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 217 |  |  |  | (6 | ) |  |  | 3 |
Total liabilities |  | $ | 384 |  |  | $ | (43 | ) |  | $ | 21 |  |  | $ | - |  |  | $ | - |  |  | $ | (103 | ) |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 259 |  |  | $ | (18 | ) |  | $ | 8 |
(1) - | Reported within the “Unrealized gains (losses) on available-for-sale securities” on MBIA’s Consolidated Statement of Comprehensive Income/Loss.
(2) - | Reported within the “Instrument-specific credit risk of liabilities measured at fair value” on MBIA’s Consolidated Statement of Comprehensive Income/Loss.
For the three months ended June 30, 2023, sales include the impact of the deconsolidation of VIEs. Refer to “Note 4: Variable Interest Entities” for additional information about the deconsolidation of VIEs. For the three months ended June 30, 2023 and 2022, there were no transfers into or out of Level 3. 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 six months ended June 30, 2023 and 2022: Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Six Months Ended June 30, 2023
In millions |  | Balance, Beginning of Year |  | Total Gains / (Losses) Included in Earnings |  | Unrealized Gains / (Losses) Included in OCI (1) |  | Purchases |  | Issuances |  | Settlements |  | Sales |  | Transfers into Level 3 |  | Transfers out of Level 3 |  | Ending Balance |  | Change in Unrealized Gains (Losses) for the Period Included in Earnings for Assets still held as of June 30, 2023 |  | Change in Unrealized Gains (Losses) for the Period Included in OCI for Assets still held as of June 30, 2023 (1)
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate obligations |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 1 |  |  | $ | - |  |  | $ | 1 |  |  | $ | - |  |  | $ | - |
Equity investments |  |  | 115 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 115 |  |  |  | - |  |  |  | - |
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans receivable - residential |  |  | 78 |  |  |  | (3 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (5 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 70 |  |  |  | (7 | ) |  |  | - |
Other |  |  | 23 |  |  |  | 3 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (24 | ) |  |  | - |  |  |  | - |  |  |  | 2 |  |  |  | (1 | ) |  |  | - |
Total assets |  | $ | 216 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | (5 | ) |  | $ | (24 | ) |  | $ | 1 |  |  | $ | - |  |  | $ | 188 |  |  | $ | (8 | ) |  | $ | - |
In millions |  | Balance, Beginning of Year |  | Total (Gains) / Losses Included in Earnings |  | Unrealized (Gains) / Losses Included in Credit Risk in OCI (2) |  | Purchases |  | Issuances |  | Settlements |  | Sales |  | Transfers into Level 3 |  | Transfers out of Level 3 |  | Ending Balance |  | Change in Unrealized (Gains) Losses for the Period Included in Earnings for Liabilities still held as of June 30, 2023 |  | Change in Unrealized (Gains) Losses for the Period Included in OCI for Liabilities still held as of June 30, 2023 (2)
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Medium-term notes |  | $ | 41 |  |  | $ | - |  |  | $ | (3 | ) |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 38 |  |  | $ | - |  |  | $ | (3 | )
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
VIE notes |  |  | 172 |  |  |  | 33 |  |  |  | (26 | ) |  |  | - |  |  |  | 62 |  |  |  | (24 | ) |  |  | (34 | ) |  |  | - |  |  |  | - |  |  |  | 183 |  |  |  | (3 | ) |  |  | 7 |
Currency derivatives |  |  | 6 |  |  |  | 6 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 12 |  |  |  | 6 |  |  |  | - |
Total liabilities |  | $ | 219 |  |  | $ | 39 |  |  | $ | (29 | ) |  | $ | - |  |  | $ | 62 |  |  | $ | (24 | ) |  | $ | (34 | ) |  | $ | - |  |  | $ | - |  |  | $ | 233 |  |  | $ | 3 |  |  | $ | 4 |
(1) - | Reported within the “Unrealized gains (losses) on available-for-sale securities” on MBIA’s Consolidated Statement of Comprehensive Income/Loss.
(2) - | Reported within the “Instrument-specific credit risk of liabilities measured at fair value ” on MBIA’s Consolidated Statement of Comprehensive Income/Loss.
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Six Months Ended June 30, 2022
In millions |  | Balance, Beginning of Year |  | Total Gains / (Losses) Included in Earnings |  | Unrealized Gains / (Losses) Included in OCI (1) |  | Purchases |  | Issuances |  | Settlements |  | Sales |  | Transfers into Level 3 |  | Transfers out of Level 3 |  | Ending Balance |  | Change in Unrealized Gains (Losses) for the Period Included in Earnings for Assets still held as of June 30, 2022 |  | Change in Unrealized Gains (Losses) for the Period Included in Earnings for Assets still held as of June 30, 2022 (1)
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage- backed non-agency |  | $ | - |  |  | $ | 1 |  |  | $ | (5 | ) |  | $ | 59 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 55 |  |  | $ | - |  |  | $ | - |
Assets of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collateralized debt obligations |  |  | 4 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (4 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Loans receivable - residential |  |  | 77 |  |  |  | (5 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (4 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 68 |  |  |  | (9 | ) |  |  | - |
Currency derivatives |  |  | 9 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 9 |  |  |  | - |  |  |  | - |
Other |  |  | 14 |  |  |  | 2 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 16 |  |  |  | 2 |  |  |  | - |
Total assets |  | $ | 104 |  |  | $ | (2 | ) |  | $ | (5 | ) |  | $ | 59 |  |  | $ | - |  |  | $ | (8 | ) |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 148 |  |  | $ | (7 | ) |  | $ | - |
In millions |  | Balance, Beginning of Year |  | Total (Gains) / Losses Included in Earnings |  | Unrealized (Gains) / Losses Included in OCI (2) |  | Purchases |  | Issuances |  | Settlements |  | Sales |  | Transfers into Level 3 |  | Transfers out of Level 3 |  | Ending Balance |  | Change in Unrealized (Gains) Losses for the Period Included in Earnings for Liabilities still held as of June 30, 2022 |  | Change in Unrealized (Gains) Losses for the Period Included in OCI for Liabilities still held as of June 30, 2022 (2)
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Medium-term notes |  | $ | 98 |  |  | $ | (22 | ) |  | $ | 13 |  |  | $ | - |  |  | $ | - |  |  | $ | (47 | ) |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 42 |  |  | $ | (20 | ) |  | $ | 14 |
Liabilities of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
VIE notes |  |  | 291 |  |  |  | (26 | ) |  |  | 20 |  |  |  | - |  |  |  | - |  |  |  | (68 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 217 |  |  |  | (8 | ) |  |  | 6 |
Total liabilities |  | $ | 389 |  |  | $ | (48 | ) |  | $ | 33 |  |  | $ | - |  |  | $ | - |  |  | $ | (115 | ) |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 259 |  |  | $ | (28 | ) |  | $ | 20 |
(1) - | Reported within the “Unrealized gains (losses) on available-for-sale securities” on MBIA’s Consolidated Statement of Comprehensive Income/Loss.
(2) - | Reported within the “Instrument-specific credit risk of liabilities measured at fair value” on MBIA’s Consolidated Statement of Comprehensive Income/Loss.
For the six months ended June 30, 2023, sales include the impact of the deconsolidation of VIEs. Refer to “Note 4: Variable Interest Entities” for additional information about the deconsolidation of VIEs. For the six months ended June 30, 2023, transfers into Level 3 and out of Level 2 were related to corporate obligations, where inputs, which are significant to their valuation, became unobservable during the year. 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 out of Level 3. For the six months ended June 30, 2022, there were no transfers into or out of Level 3. Gains and losses (realized and unrealized) included in earnings related to Level 3 assets and liabilities for the three months ended June 30, 2023 and 2022 are reported on the Company’s consolidated statements of operations as follows:
|  | Three Months Ended June 30, 2023 |  | Three Months Ended June 30, 2022
In millions |  | Total Gains (Losses) Included in Earnings |  | Change in Unrealized Gains (Losses) for the Period Included in Earnings for Assets and Liabilities still held as of June 30, 2023 |  | Total Gains (Losses) Included in Earnings |  | Change in Unrealized Gains (Losses) for the Period Included in Earnings for Assets and Liabilities still held as of June 30, 2022
Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net gains (losses) on financial instruments at fair value and foreign exchange |  | $ | 3 |  |  | $ | 3 |  |  | $ | 14 |  |  | $ | 12 |
Revenues of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net gains (losses) on financial instruments at fair value and foreign exchange |  |  | (20 | ) |  |  | (10 | ) |  |  | 25 |  |  |  | (1 | )
Other net realized gains (losses) |  |  | (7 | ) |  |  | - |  |  |  | - |  |  |  | - |
Total |  | $ | (24 | ) |  | $ | (7 | ) |  | $ | 39 |  |  | $ | 11 |
Gains and losses (realized and unrealized) included in earnings relating to Level 3 assets and liabilities for the six months ended June 30, 2023 and 2022 are reported on the Company’s consolidated statements of operations as follows:
|  | Six Months Ended June 30, 2023 |  | Six Months Ended June 30, 2022
In millions |  | Total Gains (Losses) Included in Earnings |  | Change in Unrealized Gains (Losses) for the Period Included in Earnings for Assets and Liabilities still held as of June 30, 2023 |  | Total Gains (Losses) Included in Earnings |  | Change in Unrealized Gains (Losses) for the Period Included in Earnings for Assets and Liabilities still held as of June 30, 2022
Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net gains (losses) on financial instruments at fair value and foreign exchange |  | $ | - |  |  | $ | - |  |  | $ | 23 |  |  | $ | 20 |
Revenues of consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net gains (losses) on financial instruments at fair value and foreign exchange |  |  | (18 | ) |  |  | (11 | ) |  |  | 23 |  |  |  | 1 |
Other net realized gains (losses) |  |  | (21 | ) |  |  | - |  |  |  | - |  |  |  | - |
Total |  | $ | (39 | ) |  | $ | (11 | ) |  | $ | 46 |  |  | $ | 21 |
Fair Value Option The Company elected to record at fair value certain financial instruments, including certain equity investments and financial instruments that are consolidated in connection with the adoption of the accounting guidance for consolidation of VIEs. The following table presents the gains and (losses) included in the Company’s consolidated statements of operations for the three and six months ended June 30, 2023 and 2022 for financial instruments for which the fair value option was elected:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
In millions |  | 2023 |  | 2022 |  | 2023 |  | 2022
Investments carried at fair value (1) |  | $ | - |  |  | $ | (26 | ) |  | $ | 3 |  |  | $ | (34 | )
Fixed-maturity securities held at fair value-VIE (3) |  |  | - |  |  |  | (2 | ) |  |  | (4 | ) |  |  | (3 | )
Loans receivable at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage loans (2) |  |  | (11 | ) |  |  | (6 | ) |  |  | (3 | ) |  |  | (5 | )
Other assets-VIE (3) |  |  | 2 |  |  |  | 1 |  |  |  | 3 |  |  |  | 2 |
Medium-term notes (1) |  |  | 3 |  |  |  | 13 |  |  |  | - |  |  |  | 22 |
Variable interest entity notes (3) |  |  | (17 | ) |  |  | 28 |  |  |  | (33 | ) |  |  | 23 |
(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. (3) - Reported within “Net gains (losses) on financial instruments at fair value and foreign exchange-VIE” and “Other net realized gains (losses)-VIE” on MBIA’s consolidated statements of operat ion s. The following table reflects the difference between the aggregate fair value and the aggregate remaining contractual principal balance outstanding as of June 30, 2023 and December 31, 2022 for loans and notes for which the fair value option was elected:
|  | As of June 30, 2023 |  | As of December 31, 2022
In millions |  | Contractual Outstanding Principal |  | Fair Value |  | Difference |  | Contractual Outstanding Principal |  | Fair Value |  | Difference
Loans receivable at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage loans - current |  | $ | 43 |  |  | $ | 43 |  |  | $ | - |  |  | $ | 39 |  |  | $ | 39 |  |  | $ | - |
Residential mortgage loans (90 days or more past due) |  |  | 167 |  |  |  | 27 |  |  |  | 140 |  |  |  | 149 |  |  |  | 39 |  |  |  | 110 |
Total loans receivable and other instruments at fair value |  | $ | 210 |  |  | $ | 70 |  |  | $ | 140 |  |  | $ | 188 |  |  | $ | 78 |  |  | $ | 110 |
Variable interest entity notes |  | $ | 503 |  |  | $ | 183 |  |  | $ | 320 |  |  | $ | 780 |  |  | $ | 172 |  |  | $ | 608 |
Medium-term notes |  | $ | 55 |  |  | $ | 38 |  |  | $ | 17 |  |  | $ | 53 |  |  | $ | 41 |  |  | $ | 12 |
The differences between the contractual outstanding principal and the fair values on loans receivable, VIE notes and MTNs in the preceding table are primarily attributable to credit risk. This is due to the high rate of defaults on loans (90 days or more past due), the collateral supporting the VIE notes and the nonperformance risk of the Company on its MTNs, all of which resulted in depressed pricing of the financial instruments. Instrument-Specific Credit Risk of Liabilities Elected Under the Fair Value Option As of June 30, 2023 and December 31, 2022, the cumulative changes in instrument-specific credit risk of liabilities elected under the fair value option were losses of $16 million and $45 million, respectively, reported in “Accumulated other comprehensive income” on the Company’s consolidated balance sheets. Changes in value attributable to instrument-specific credit risk were derived principally from changes in the Company’s credit spread. For liabilities of VIEs, additional adjustments to instrument-specific credit risk are required, which is determined by an analysis of deal specific performance of collateral that support these liabilities. During the three months ended June 30, 2023 and 2022, the portions of instrument-specific credit risk included in AOCI that were recognized in earnings due to settlement of liabilities were losses of $20 million and gains of $15 million, respectively. During the six months ended June 30, 2023 and 2022, the portions of instrument-specific credit risk included in AOCI that were recognized in earnings due to settlement of liabilities were losses of $34 million and gains of $12 million, respectively.

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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/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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