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## NOTE 6 Asset Securitization 

Periodically, we securitize loans for capital management purposes or to provide alternative sources of funding. Securitization involves selling loans to off-balance sheet special-purpose entities or trusts (securitization vehicles) which buy the loans and then issue interest bearing investor certificates. 

Contracts with the securitization vehicles provide for the payment to us over time of the excess of the sum of interest and fees collected from customers, in connection with the loans that were sold, over the yield paid to investors in the securitization vehicle, less credit losses and other costs (the deferred purchase price). 

When the transferred loans are considered sold for accounting purposes, we remove them from our balance sheet. 

For transfers that have occurred since July 1, 2001, we account for them as sales when control over the assets is given up. We recognize securitization revenues at the time of the sale, based on our best estimate of the net present value of expected future cash flows, primarily the deferred purchase price, net of our estimate of the fair value of any servicing obligations undertaken. The deferred purchase price is recorded in our Consolidated Balance Sheet in other assets. 

For all transfers prior to July 1, 2001, except for the securitization of National Housing Act (GLYPH<210>NHAGLYPH<211>) insured mortgages, we accounted for these securitization transactions as sales when the significant risks and rewards of ownership of the l oans had been transferred. For those transfers, we record securitization revenues over the life of the securitization as the deferred purchase price becomes legally payable to us. For transfers of NHA-insured mortgages, we recorded a gain or loss in securitization revenues at the date of sale, based on the estimated net present value of the deferred purchase price at that time. 

For some of our securitizations, we are required to purchase sub- ordinated interests or maintain cash amounts deposited with the securitization vehicle. This provides the securitization vehicle with source of funds in the event that the sum of interest and fees collected on the loans is not sufficient to pay the interest owed to investors. We record these amounts in other assets in our Consol- idated Balance Sheet. 

We periodically review the carrying value of assets on our Consolidated Balance Sheet arising from our securitizations and when we identify a decline in value that is other than temporary, the affected carrying amount is written down to its fair value. Any write-down is recorded in our Consolidated Statement of Income as a reduction of securitization revenues. 

The following table summarizes the impact of securitizations on our Co nsolidated Statement of Income for the years ended October  31: 

<img src='content_image/129396.jpg'>

The following table summarizes the impact of securitizations on our Conso lidated Balance Sheet as at October 31: 

<img src='content_image/129395.jpg'>

The following table summarizes certain cash flows received from securitiz ation vehicles for the years ended October 31: 

<img src='content_image/129400.jpg'>

The following table sets out credit information related to our secu- ritized assets: 

<img src='content_image/129401.jpg'>

Static pool credit losses provide a measure of the credit risk in our securitized assets. They are calculated by totalling the actual and projected future credit losses and dividing the result by the original balance of each pool of assets. Static pool credit losses for the years ended October 31 are as follows: 

<img src='content_image/129402.jpg'>

