Annual report pursuant to Section 13 and 15(d)

Outstanding Loans and Leases

v2.4.0.6
Outstanding Loans and Leases
12 Months Ended
Dec. 31, 2011
Loans and Leases Receivable Disclosure [Abstract]  
Outstanding Loans and Leases
Outstanding Loans and Leases
The following tables present total outstanding loans and leases and an aging analysis at December 31, 2011 and 2010.
The Legacy Asset Servicing portfolio, as shown in the table below, is a separately managed legacy mortgage portfolio. Legacy Asset Servicing, which was created on January 1, 2011 in connection with the re-alignment of the Consumer Real Estate Services (CRES) business segment, is responsible for servicing loans on its balance sheet and for others including loans held in other business segments and All Other. This includes servicing and managing the runoff and exposures related to selected residential mortgages and home equity loans, including discontinued real estate products, Countrywide PCI loans and certain loans that met a pre-defined delinquency status or probability of default threshold as of January 1, 2011. Since making the determination of the pool of loans to be included in the Legacy Asset Servicing portfolio, the criteria have not changed for this portfolio; however, the criteria will continue to be evaluated over time.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2011
(Dollars in millions)
30-59 Days Past Due (1)
 
60-89 Days Past Due (1)
 
90 Days or
More
Past Due (2)
 
Total Past
Due 30 Days
or More
 
Total Current or Less Than 30 Days Past Due (3)
 
Purchased
Credit-impaired
(4)
 
Loans Accounted for Under the Fair Value Option
 
Total
Outstandings
Home loans
 

 
 
 
 

 
 

 
 

 
 

 
 

 
 

Core portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage (5)
$
2,151

 
$
751

 
$
3,017

 
$
5,919

 
$
172,418

 
$

 
 
 
$
178,337

Home equity
260

 
155

 
429

 
844

 
66,211

 

 
 
 
67,055

Legacy Asset Servicing portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
3,195

 
2,174

 
32,167

 
37,536

 
36,451

 
9,966

 
 
 
83,953

Home equity
845

 
508

 
1,735

 
3,088

 
42,578

 
11,978

 
 
 
57,644

Discontinued real estate (6)
65

 
24

 
351

 
440

 
798

 
9,857

 
 
 
11,095

Credit card and other consumer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. credit card
981

 
772

 
2,070

 
3,823

 
98,468

 

 
 
 
102,291

Non-U.S. credit card
148

 
120

 
342

 
610

 
13,808

 

 
 
 
14,418

Direct/Indirect consumer (7)
805

 
338

 
779

 
1,922

 
87,791

 

 
 
 
89,713

Other consumer (8)
55

 
21

 
17

 
93

 
2,595

 

 
 
 
2,688

Total consumer loans
8,505

 
4,863

 
40,907

 
54,275

 
521,118

 
31,801

 
 
 
607,194

Consumer loans accounted for under the fair value option (9)
 

 
 

 
 

 
 

 
 

 
 

 
$
2,190

 
2,190

Total consumer
8,505

 
4,863

 
40,907

 
54,275

 
521,118

 
31,801

 
2,190

 
609,384

Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. commercial
272

 
83

 
2,249

 
2,604

 
177,344

 

 
 
 
179,948

Commercial real estate (10)
133

 
44

 
3,887

 
4,064

 
35,532

 

 
 
 
39,596

Commercial lease financing
78

 
13

 
40

 
131

 
21,858

 

 
 
 
21,989

Non-U.S. commercial
24

 

 
143

 
167

 
55,251

 

 
 
 
55,418

U.S. small business commercial
142

 
100

 
331

 
573

 
12,678

 

 
 
 
13,251

Total commercial loans
649

 
240

 
6,650

 
7,539

 
302,663

 

 
 
 
310,202

Commercial loans accounted for under the fair value option (9)
 

 
 

 
 

 
 

 
 

 
 

 
6,614

 
6,614

Total commercial
649

 
240

 
6,650

 
7,539

 
302,663

 

 
6,614

 
316,816

Total loans and leases
$
9,154

 
$
5,103

 
$
47,557

 
$
61,814

 
$
823,781

 
$
31,801

 
$
8,804

 
$
926,200

Percentage of outstandings
0.99
%
 
0.55
%
 
5.13
%
 
6.67
%
 
88.95
%
 
3.43
%
 
0.95
%
 
 

(1) 
Home loans includes $3.6 billion of fully-insured loans, $770 million of nonperforming loans and $119 million of TDRs that were removed from the Countrywide PCI loan portfolio prior to the adoption of accounting guidance on PCI loans effective January 1, 2010.
(2) 
Home loans includes $21.2 billion of fully-insured loans and $378 million of TDRs that were removed from the Countrywide PCI loan portfolio prior to the adoption of accounting guidance on PCI loans effective January 1, 2010.
(3) 
Home loans includes $1.8 billion of nonperforming loans as all principal and interest are not current or the loans are TDRs that have not demonstrated sustained repayment performance.
(4) 
PCI loan amounts are shown gross of the valuation allowance.
(5) 
Total outstandings includes non-U.S. residential mortgages of $85 million at December 31, 2011.
(6) 
Total outstandings includes $9.9 billion of pay option loans and $1.2 billion of subprime loans at December 31, 2011. The Corporation no longer originates these products.
(7) 
Total outstandings includes dealer financial services loans of $43.0 billion, consumer lending loans of $8.0 billion, U.S. securities-based lending margin loans of $23.6 billion, student loans of $6.0 billion, non-U.S. consumer loans of $7.6 billion and other consumer loans of $1.5 billion at December 31, 2011.
(8) 
Total outstandings includes consumer finance loans of $1.7 billion, other non-U.S. consumer loans of $929 million and consumer overdrafts of $103 million at December 31, 2011.
(9) 
Certain consumer loans are accounted for under the fair value option and include residential mortgage loans of $906 million and discontinued real estate loans of $1.3 billion at December 31, 2011. Certain commercial loans are accounted for under the fair value option and include U.S. commercial loans of $2.2 billion and non-U.S. commercial loans of $4.4 billion at December 31, 2011. See Note 22 – Fair Value Measurements and Note 23 – Fair Value Option for additional information.
(10) 
Total outstandings includes U.S. commercial real estate loans of $37.8 billion and non-U.S. commercial real estate loans of $1.8 billion at December 31, 2011.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2010
(Dollars in millions)
30-59 Days
Past Due
(1)
 
60-89 Days Past Due (1)
 
90 Days or
More
Past Due
(2)
 
Total Past
Due 30 Days
or More
 
Total Current or Less Than 30 Days Past Due (3)
 
Purchased
Credit-impaired
(4)
 
Loans Accounted for Under the Fair Value Option
 
Total Outstandings
Home loans
 

 
 
 
 

 
 

 
 

 
 

 
 

 
 

Core portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage (5)
$
1,160

 
$
236

 
$
1,255

 
$
2,651

 
$
164,276

 
$

 
 

 
$
166,927

Home equity
186

 
12

 
105

 
303

 
71,216

 

 
 

 
71,519

Legacy Asset Servicing portfolio
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential mortgage
3,999

 
2,879

 
31,985

 
38,863

 
41,591

 
10,592

 
 

 
91,046

Home equity
1,096

 
792

 
2,186

 
4,074

 
49,798

 
12,590

 
 

 
66,462

Discontinued real estate (6)
68

 
39

 
419

 
526

 
930

 
11,652

 
 

 
13,108

Credit card and other consumer
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. credit card
1,398

 
1,195

 
3,320

 
5,913

 
107,872

 

 
 

 
113,785

Non-U.S. credit card
439

 
316

 
599

 
1,354

 
26,111

 

 
 

 
27,465

Direct/Indirect consumer (7)
1,086

 
522

 
1,104

 
2,712

 
87,596

 

 
 

 
90,308

Other consumer (8)
65

 
25

 
50

 
140

 
2,690

 

 
 

 
2,830

Total consumer
9,497

 
6,016

 
41,023

 
56,536

 
552,080

 
34,834

 
 

 
643,450

Commercial
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. commercial
432

 
222

 
3,689

 
4,343

 
171,241

 
2

 
 

 
175,586

Commercial real estate (9)
250

 
70

 
5,876

 
6,196

 
43,036

 
161

 
 

 
49,393

Commercial lease financing
82

 
18

 
135

 
235

 
21,707

 

 
 

 
21,942

Non-U.S. commercial
25

 
2

 
239

 
266

 
31,722

 
41

 
 

 
32,029

U.S. small business commercial
189

 
158

 
529

 
876

 
13,843

 

 
 

 
14,719

Total commercial loans
978

 
470

 
10,468

 
11,916

 
281,549

 
204

 
 

 
293,669

Commercial loans accounted for under the fair value option (10)
 
 
 
 
 
 
 
 
 
 
 
 
$
3,321

 
3,321

Total commercial
978

 
470

 
10,468

 
11,916

 
281,549

 
204

 
3,321

 
296,990

Total loans and leases
$
10,475

 
$
6,486

 
$
51,491

 
$
68,452

 
$
833,629

 
$
35,038

 
$
3,321

 
$
940,440

Percentage of outstandings
1.11
%
 
0.69
%
 
5.48
%
 
7.28
%
 
88.64
%
 
3.73
%
 
0.35
%
 
 

(1) 
Home loans includes $2.4 billion of fully-insured loans, $818 million of nonperforming loans and $156 million of TDRs that were removed from the Countrywide PCI loan portfolio prior to the adoption of accounting guidance on PCI loans effective January 1, 2010.
(2) 
Home loans includes $16.8 billion of fully-insured loans and $372 million of TDRs that were removed from the Countrywide PCI loan portfolio prior to the adoption of accounting guidance on PCI loans effective January 1, 2010.
(3) 
Home loans includes $1.1 billion of nonperforming loans as all principal and interest are not current or the loans are TDRs that have not demonstrated sustained repayment performance.
(4) 
PCI loan amounts are shown gross of the valuation allowance and exclude $1.6 billion of PCI home loans from the Merrill Lynch acquisition which are included in their appropriate aging categories.
(5) 
Total outstandings includes non-U.S. residential mortgages of $90 million at December 31, 2010.
(6) 
Total outstandings includes $11.8 billion of pay option loans and $1.3 billion of subprime loans at December 31, 2010. The Corporation no longer originates these products.
(7) 
Total outstandings includes dealer financial services loans of $43.3 billion, consumer lending loans of $12.4 billion, U.S. securities-based lending margin loans of $16.6 billion, student loans of $6.8 billion, non-U.S. consumer loans of $8.0 billion and other consumer loans of $3.2 billion at December 31, 2010.
(8) 
Total outstandings includes consumer finance loans of $1.9 billion, other non-U.S. consumer loans of $803 million and consumer overdrafts of $88 million at December 31, 2010.
(9) 
Total outstandings includes U.S. commercial real estate loans of $46.9 billion and non-U.S. commercial real estate loans of $2.5 billion at December 31, 2010.
(10) 
Certain commercial loans are accounted for under the fair value option and include U.S. commercial loans of $1.6 billion, non-U.S. commercial loans of $1.7 billion and commercial real estate loans of $79 million at December 31, 2010. See Note 22 – Fair Value Measurements and Note 23 – Fair Value Option for additional information.

The Corporation mitigates a portion of its credit risk on the residential mortgage portfolio through the use of synthetic securitization vehicles. These vehicles issue long-term notes to investors, the proceeds of which are held as cash collateral. The Corporation pays a premium to the vehicles to purchase mezzanine loss protection on a portfolio of residential mortgages owned by the Corporation. Cash held in the vehicles is used to reimburse the Corporation in the event that losses on the mortgage portfolio exceed 10 basis points (bps) of the original pool balance, up to the remaining amount of purchased loss protection of $783 million and $1.1 billion at December 31, 2011 and 2010. The vehicles from which the Corporation purchases credit protection are VIEs. The Corporation does not have a variable interest in these vehicles. Accordingly, these vehicles are not consolidated by the Corporation. Amounts due from the vehicles are recorded in other income (loss) when the Corporation recognizes a reimbursable loss, as described above. Amounts are collected when reimbursable losses are realized through the sale of the underlying collateral. At December 31, 2011 and 2010, the Corporation had a receivable of $359 million and $722 million from these vehicles for reimbursement of losses, and principal of $23.9 billion and $53.9 billion of residential mortgage loans was referenced under these agreements. The Corporation records an allowance for credit losses on these loans without regard to the existence of the purchased loss protection as the protection does not represent a guarantee of individual loans.
In addition, the Corporation has entered into long-term credit protection agreements with FNMA and FHLMC on principal totaling $23.8 billion and $12.9 billion at December 31, 2011 and 2010, providing full protection on residential mortgage loans that become severely delinquent. All of these loans are individually insured and therefore the Corporation does not record an allowance for credit losses related to these loans.
Nonperforming Loans and Leases
The Credit Quality table presents the Corporation’s nonperforming loans and leases including nonperforming TDRs and loans accruing past due 90 days or more at December 31, 2011 and 2010. Nonperforming loans and leases exclude performing TDRs and loans accounted for under the fair value option. Nonperforming LHFS are excluded from nonperforming loans and leases as they are recorded at either fair value or the lower of cost or fair value. In addition, PCI loans, consumer credit card loans, business card loans and in general consumer loans not secured by real estate, including renegotiated loans, are not considered nonperforming and are therefore excluded from nonperforming loans and leases in the table below. Real estate-secured past due consumer fully-insured loans are reported as performing since the principal repayment is insured. See Note 1 – Summary of Significant Accounting Principles for further information on the criteria for classification as nonperforming.
 
 
 
 
 
 
 
 
Credit Quality
 
 
 
 
 
 
 
 
 
 
 
Nonperforming Loans and Leases
 
Accruing Past Due
90 Days or More
 
December 31
 
December 31
(Dollars in millions)
2011
 
2010
 
2011
 
2010
Home loans
 

 
 

 
 

 
 

Core portfolio
 
 
 
 
 
 
 
Residential mortgage (1)
$
2,414

 
$
1,510

 
$
883

 
$
16

Home equity
439

 
107

 

 

Legacy Asset Servicing portfolio
 

 
 

 
 

 
 
Residential mortgage (1)
13,556

 
16,181

 
20,281

 
16,752

Home equity
2,014

 
2,587

 

 

Discontinued real estate
290

 
331

 

 

Credit card and other consumer
 

 
 

 
 
 
 
U.S. credit card
n/a

 
n/a

 
2,070

 
3,320

Non-U.S. credit card
n/a

 
n/a

 
342

 
599

Direct/Indirect consumer
40

 
90

 
746

 
1,058

Other consumer
15

 
48

 
2

 
2

Total consumer
18,768

 
20,854

 
24,324

 
21,747

Commercial
 

 
 

 
 

 
 

U.S. commercial
2,174

 
3,453

 
75

 
236

Commercial real estate
3,880

 
5,829

 
7

 
47

Commercial lease financing
26

 
117

 
14

 
18

Non-U.S. commercial
143

 
233

 

 
6

U.S. small business commercial
114

 
204

 
216

 
325

Total commercial
6,337

 
9,836

 
312

 
632

Total consumer and commercial
$
25,105

 
$
30,690

 
$
24,636

 
$
22,379

(1) 
Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At December 31, 2011 and 2010, residential mortgage includes $17.0 billion and $8.3 billion of loans on which interest has been curtailed by the FHA, and therefore are no longer accruing interest, although principal is still insured, and $4.2 billion and $8.5 billion of loans on which interest is still accruing.
n/a = not applicable

Included in certain loan categories in nonperforming loans and leases in the table above are TDRs that are classified as nonperforming. At December 31, 2011 and 2010, the Corporation had $4.7 billion and $3.0 billion of residential mortgages, $539 million and $535 million of home equity, $97 million and $75 million of discontinued real estate, $531 million and $175 million of U.S. commercial, $1.1 billion and $770 million of commercial real estate and $38 million and $7 million of non-U.S. commercial loans that were TDRs and classified as nonperforming.
Credit Quality Indicators
The Corporation monitors credit quality within its three portfolio segments based on primary credit quality indicators. For more information on the portfolio segments, see Note 1 – Summary of Significant Accounting Principles. Within the home loans portfolio segment, the primary credit quality indicators are refreshed LTV and refreshed FICO score. Refreshed LTV measures the carrying value of the loan as a percentage of the value of property securing the loan, refreshed quarterly. Home equity loans are evaluated using CLTV which measures the carrying value of the combined loans that have liens against the property and the available line of credit as a percentage of the appraised value of the property securing the loan, refreshed quarterly. Refreshed FICO score measures the creditworthiness of the borrower based on the financial obligations of the borrower and the borrower’s credit history. At a minimum, FICO scores are refreshed quarterly, and in many cases, more frequently. Refreshed FICO score is also a primary credit quality indicator for the credit card and other consumer portfolio segment and the business card portfolio within U.S. small business commercial. The Corporation’s commercial loans are evaluated using the internal classifications of pass rated or reservable criticized as the primary credit quality indicators. The term reservable criticized refers to those commercial loans that are internally classified or listed by the Corporation as Special Mention, Substandard or Doubtful, which are asset categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not considered reservable criticized. In addition to these primary credit quality indicators, the Corporation uses other credit quality indicators for certain types of loans.

The following tables present certain credit quality indicators for the Corporation’s home loans, credit card and other consumer loans, and commercial loan portfolio segments, by class of financing receivables, at December 31, 2011 and 2010.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home Loans - Credit Quality Indicators (1)
 
 
 
December 31, 2011
(Dollars in millions)
Core Portfolio Residential
Mortgage (2)
 
Legacy Asset Servicing Residential
Mortgage (2)
 
Countrywide Residential Mortgage PCI
 
Core Portfolio Home Equity (2)
 
Legacy Asset Servicing Home Equity (2)
 
Countrywide Home Equity PCI
 
Legacy Asset Servicing Discontinued
Real Estate (2)
 
Countrywide
Discontinued
Real Estate
PCI
Refreshed LTV (3)
 

 
 

 
 

 
 

 
 
 
 
 
 

 
 

Less than 90 percent
$
80,032

 
$
20,450

 
$
3,821

 
$
46,646

 
$
17,354

 
$
2,253

 
$
895

 
$
5,953

Greater than 90 percent but less than 100 percent
11,838

 
5,847

 
1,468

 
6,988

 
4,995

 
1,077

 
122

 
1,191

Greater than 100 percent
17,673

 
22,630

 
4,677

 
13,421

 
23,317

 
8,648

 
221

 
2,713

Fully-insured loans (4)
68,794

 
25,060

 

 

 

 

 

 

Total home loans
$
178,337

 
$
73,987

 
$
9,966

 
$
67,055

 
$
45,666

 
$
11,978

 
$
1,238


$
9,857

Refreshed FICO score
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less than 620
$
7,020

 
$
17,337

 
$
3,749

 
$
4,148

 
$
8,990

 
$
3,203

 
$
548

 
$
5,968

Greater than or equal to 620
102,523

 
31,590

 
6,217

 
62,907

 
36,676

 
8,775

 
690

 
3,889

Fully-insured loans (4)
68,794

 
25,060

 

 

 

 

 

 

Total home loans
$
178,337

 
$
73,987

 
$
9,966

 
$
67,055

 
$
45,666

 
$
11,978

 
$
1,238

 
$
9,857

(1) 
Excludes $2.2 billion of loans accounted for under the fair value option.
(2) 
Excludes Countrywide PCI loans.
(3) 
Refreshed LTV percentages for PCI loans are calculated using the carrying value gross of the related valuation allowance.
(4) 
Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.
 
 
 
 
 
 
 
 
Credit Card and Other Consumer - Credit Quality Indicators
 
 
 
December 31, 2011
(Dollars in millions)
U.S. Credit
Card
 
Non-U.S.
Credit Card
 
Direct/Indirect
Consumer
 
Other
Consumer (1)
Refreshed FICO score
 

 
 

 
 

 
 

Less than 620
$
8,172

 
$

 
$
3,325

 
$
802

Greater than or equal to 620
94,119

 

 
46,981

 
854

Other internal credit metrics (2, 3, 4)

 
14,418

 
39,407

 
1,032

Total credit card and other consumer
$
102,291

 
$
14,418

 
$
89,713

 
$
2,688


(1) 
96 percent of the other consumer portfolio was associated with portfolios from certain consumer finance businesses that the Corporation previously exited.
(2) 
Other internal credit metrics may include delinquency status, geography or other factors.
(3) 
Direct/indirect consumer includes $31.1 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $6.0 billion of loans the Corporation no longer originates.
(4) 
Non-U.S. credit card represents the select European countries’ credit card portfolios which are evaluated using internal credit metrics, including delinquency status. At December 31, 2011, 96 percent of this portfolio was current or less than 30 days past due, two percent was 30-89 days past due and two percent was 90 days or more past due.
 
 
 
 
 
 
 
 
 
 
Commercial - Credit Quality Indicators (1)
 
 
 
December 31, 2011
(Dollars in millions)
U.S.
Commercial
 
Commercial
Real Estate
 
Commercial
Lease
Financing
 
Non-U.S.
Commercial
 
U.S. Small
Business
Commercial (2)
Risk Ratings
 

 
 

 
 

 
 

 
 

Pass rated
$
169,599

 
$
28,602

 
$
20,850

 
$
53,945

 
$
2,392

Reservable criticized
10,349

 
10,994

 
1,139

 
1,473

 
836

Refreshed FICO score (3)
 
 
 
 
 
 
 
 
 

Less than 620
 

 
 

 
 

 
 

 
562

Greater than or equal to 620
 
 
 
 
 
 
 
 
4,674

Other internal credit metrics (3, 4)
 
 
 
 
 
 
 
 
4,787

Total commercial credit
$
179,948

 
$
39,596

 
$
21,989

 
$
55,418

 
$
13,251

(1) 
Excludes $6.6 billion of loans accounted for under the fair value option.
(2) 
U.S. small business commercial includes $491 million of criticized business card and small business loans which are evaluated using FICO scores or internal credit metrics, including delinquency status, rather than risk ratings. At December 31, 2011, 97 percent of the balances where internal credit metrics are used were current or less than 30 days past due.
(3) 
Refreshed FICO score and other internal credit metrics are applicable only to the U.S. small business commercial portfolio.
(4) 
Other internal credit metrics may include delinquency status, application scores, geography or other factors.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home Loans - Credit Quality Indicators
 
 
 
December 31, 2010
(Dollars in millions)
Core Portfolio Residential
Mortgage (1)
 
Legacy Asset Servicing Residential
Mortgage (1)
 
Countrywide Residential Mortgage PCI
 
Core Portfolio Home Equity (1)
 
Legacy Asset Servicing Home Equity (1)
 
Countrywide Hone Equity PCI
 
Legacy Asset Servicing Discontinued
Real Estate (1)
 
Countrywide
Discontinued
Real Estate
PCI
Refreshed LTV (2)
 

 
 

 
 

 
 

 
 
 
 
 
 

 
 

Less than 90 percent
$
95,874

 
$
21,357

 
$
3,710

 
$
51,555

 
$
22,125

 
$
2,313

 
$
1,033

 
$
6,713

Greater than 90 percent but less than 100 percent
11,581

 
8,234

 
1,664

 
7,534

 
6,504

 
1,215

 
155

 
1,319

Greater than 100 percent
14,047

 
29,043

 
5,218

 
12,430

 
25,243

 
9,062

 
268

 
3,620

Fully-insured loans (3)
45,425

 
21,820

 

 

 

 

 

 

Total home loans
$
166,927

 
$
80,454

 
$
10,592

 
$
71,519

 
$
53,872

 
$
12,590

 
$
1,456


$
11,652

Refreshed FICO score
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Less than 620
$
5,193

 
$
22,126

 
$
4,016

 
$
3,932

 
$
11,562

 
$
3,206

 
$
663

 
$
7,168

Greater than or equal to 620
116,309

 
36,508

 
6,576

 
67,587

 
42,310

 
9,384

 
793

 
4,484

Fully-insured loans (3)
45,425

 
21,820

 

 

 

 

 

 

Total home loans
$
166,927

 
$
80,454

 
$
10,592

 
$
71,519

 
$
53,872

 
$
12,590

 
$
1,456


$
11,652

(1) 
Excludes Countrywide PCI loans.
(2) 
Refreshed LTV percentages for PCI loans are calculated using the carrying value gross of the related valuation allowance.
(3) 
Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.
 
 
 
 
 
 
 
 
Credit Card and Other Consumer - Credit Quality Indicators
 
 
 
December 31, 2010
(Dollars in millions)
U.S. Credit
Card
 
Non-U.S.
Credit Card
 
Direct/Indirect
Consumer
 
Other
Consumer (1)
Refreshed FICO score
 

 
 

 
 

 
 

Less than 620
$
14,159

 
$
631

 
$
6,748

 
$
979

Greater than or equal to 620
99,626

 
7,528

 
48,209

 
961

Other internal credit metrics (2, 3, 4)

 
19,306

 
35,351

 
890

Total credit card and other consumer
$
113,785

 
$
27,465

 
$
90,308

 
$
2,830

(1) 
96 percent of the other consumer portfolio was associated with portfolios from certain consumer finance businesses that the Corporation previously exited.
(2) 
Other internal credit metrics may include delinquency status, geography or other factors.
(3) 
Direct/indirect consumer includes $24.0 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $7.4 billion of loans the Corporation no longer originates.
(4) 
Non-U.S. credit card represents the select European countries’ credit card portfolios and a portion of the Canadian credit card portfolio which are evaluated using internal credit metrics, including delinquency status. At December 31, 2010, 95 percent of this portfolio was current or less than 30 days past due, three percent was 30-89 days past due and two percent was 90 days past due or more.
 
 
 
 
 
 
 
 
 
 
Commercial - Credit Quality Indicators (1)
 
 
 
December 31, 2010
(Dollars in millions)
U.S.
Commercial
 
Commercial
Real Estate
 
Commercial
Lease
Financing
 
Non-U.S.
Commercial
 
U.S. Small
Business
Commercial (2)
Risk Ratings
 

 
 

 
 

 
 

 
 

Pass rated
$
160,154

 
$
29,757

 
$
20,754

 
$
30,180

 
$
3,139

Reservable criticized
15,432

 
19,636

 
1,188

 
1,849

 
988

Refreshed FICO score (3)
 
 
 
 
 
 
 
 
 
Less than 620
 
 
 
 
 
 
 
 
888

Greater than or equal to 620
 
 
 
 
 
 
 
 
5,083

Other internal credit metrics (3, 4)
 
 
 
 
 
 
 
 
4,621

Total commercial credit
$
175,586

 
$
49,393

 
$
21,942

 
$
32,029

 
$
14,719


(1) 
Includes $204 million of PCI loans in the commercial portfolio segment and excludes $3.3 billion of loans accounted for under the fair value option.
(2) 
U.S. small business commercial includes $690 million of criticized business card and small business loans which are evaluated using FICO scores or internal credit metrics, including delinquency status, rather than risk ratings. At December 31, 2010, 95 percent of the balances where internal credit metrics are used were current or less than 30 days past due.
(3) 
Refreshed FICO score and other internal credit metrics are applicable only to the U.S. small business commercial portfolio.
(4) 
Other internal credit metrics may include delinquency status, application scores, geography or other factors.
Impaired Loans and Troubled Debt Restructurings
A loan is considered impaired when, based on current information, it is probable that the Corporation will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans, all TDRs, and the renegotiated credit card and other consumer TDR portfolio (the renegotiated credit card and other consumer TDR portfolio, collectively, the renegotiated TDR portfolio). Impaired loans exclude nonperforming consumer loans and nonperforming commercial leases unless they are classified as TDRs. Loans accounted for under the fair value option are also excluded. PCI loans are excluded and reported separately on page 194.
Home Loans
Impaired home loans within the home loans portfolio segment consist entirely of TDRs. Excluding PCI loans, substantially all modifications of home loans meet the definition of TDRs. Modifications of home loans are done in accordance with the government’s Making Home Affordable Program (modifications under government programs) or the Corporation’s proprietary programs (modifications under proprietary programs). These modifications are considered to be TDRs if concessions have been granted to borrowers experiencing financial difficulties. Concessions may include reductions in interest rates, capitalization of past due amounts, principal and/or interest forbearance, payment extensions, principal and/or interest forgiveness or combinations thereof.
Prior to permanently modifying a loan, the Corporation may enter into trial modifications with certain borrowers under both government and proprietary programs. Trial modifications generally represent a three- to four-month period during which the borrower makes monthly payments under the anticipated modified payment terms. Upon successful completion of the trial period, the Corporation and the borrower enter into a permanent modification. In accordance with new accounting guidance effective in 2011, a loan is classified as a TDR when a binding offer is extended to borrowers to enter into a trial modification. At December 31, 2011, the Corporation classified as TDRs $2.6 billion of home loans that were participating in or had been offered a binding trial modification. These home loans TDRs had an aggregate allowance of $154 million at December 31, 2011. Approximately 55 percent of all loans that entered into a trial modification during 2011 became permanent modifications as of December 31, 2011.
In accordance with applicable accounting guidance, home loans are not classified as impaired loans unless they have been designated as a TDR. Once such a loan has been designated as a TDR, it is then individually assessed for impairment. Home loan TDRs are measured primarily based on the net present value of the estimated cash flows discounted at the loan’s original effective interest rate. If the carrying value of a TDR exceeds this amount, a specific allowance is recorded as a component of the allowance for loan and lease losses. Alternatively, home loan TDRs that are considered to be dependent solely on the collateral for repayment (e.g., due to the lack of income verification) are measured based on the estimated fair value of the collateral and a charge-off is recorded if the carrying value exceeds the fair value of the collateral. Home loans that reached 180 days past due prior to modification would have been charged-off to their net realizable value before they were modified as TDRs in accordance with established policy. Therefore, the modification of home loans that are 180 or more days past due as TDRs does not have an impact on the allowance for credit losses nor are additional charge-offs required at the time of modification. Subsequent declines in the fair value of the collateral after a loan has reached 180 days past due are recorded as charge-offs. Fully-insured loans are protected against principal loss, and therefore, the Corporation does not record an allowance for credit losses on the outstanding principal balance, even after they have been modified in a TDR.
The net present value of the estimated cash flows is based on model-driven estimates of projected payments, prepayments, defaults and loss-given-default (LGD). Using statistical modeling methodologies, the Corporation estimates the probability that a loan will default prior to maturity based on the attributes of each loan. The factors that are most relevant to the probability of default are the refreshed LTV or in the case of a subordinated lien, refreshed CLTV, borrower credit score, months since origination (i.e., vintage) and geography. Each of these factors is further broken down by present collection status (whether the loan is current, delinquent, in default or in bankruptcy). Severity (or LGD) is estimated based on the refreshed LTV for the first mortgages or CLTV for subordinated liens. The estimates are based on the Corporation’s historical experience, but are adjusted to reflect an assessment of environmental factors that may not be reflected in the historical data, such as changes in real estate values, local and national economies, underwriting standards and the regulatory environment. The probability of default models also incorporate recent experience with modification programs, a loan’s default history prior to modification and the change in borrower payments post-modification.
At December 31, 2011 and 2010, remaining commitments to lend additional funds to debtors whose terms have been modified in a home loan TDR were immaterial. Home loan foreclosed properties totaled $2.0 billion and $1.2 billion at December 31, 2011 and 2010.

The table below presents impaired loans in the Corporation’s home loans portfolio segment at December 31, 2011 and 2010. The impaired home loans table below includes primarily loans managed by Legacy Asset Servicing. Certain impaired home loans do not have a related allowance as the current valuation of these impaired loans exceeded the carrying value.
 
 
 
 
 
 
 
 
 
 
Impaired Loans – Home Loans
 
 
 
 
 
December 31, 2011
 
2011
(Dollars in millions)
Unpaid
Principal
Balance
 
Carrying
Value
 
Related
Allowance
 
Average
Carrying
Value
 
Interest
Income
Recognized (1)
With no recorded allowance
 

 
 

 
 

 
 

 
 

Residential mortgage
$
10,907

 
$
8,168

 
n/a

 
$
6,285

 
$
233

Home equity
1,747

 
479

 
n/a

 
442

 
23

Discontinued real estate
421

 
240

 
n/a

 
222

 
8

With an allowance recorded
 
 
 
 
 

 
 
 
 
Residential mortgage
$
12,296

 
$
11,119

 
$
1,295

 
$
9,379

 
$
319

Home equity
1,551

 
1,297

 
622

 
1,357

 
34

Discontinued real estate
213

 
159

 
29

 
173

 
6

Total
 

 
 

 
 

 
 

 
 

Residential mortgage
$
23,203

 
$
19,287

 
$
1,295

 
$
15,664

 
$
552

Home equity
3,298

 
1,776

 
622

 
1,799

 
57

Discontinued real estate
634

 
399

 
29

 
395

 
14

 
 
 
 
 
 
 
 
 
 
 
December 31, 2010
 
2010
With no recorded allowance
 
 
 
 
 
 
 
 
 
Residential mortgage
$
5,493

 
$
4,382

 
n/a

 
$
4,429

 
$
184

Home equity
1,411

 
437

 
n/a

 
493

 
21

Discontinued real estate
361

 
218

 
n/a

 
219

 
8

With an allowance recorded
 
 
 
 
 
 
 
 
 
Residential mortgage
$
8,593

 
$
7,406

 
$
1,154

 
$
5,226

 
$
196

Home equity
1,521

 
1,284

 
676

 
1,509

 
23

Discontinued real estate
247

 
177

 
41

 
170

 
7

Total
 
 
 
 
 
 
 
 
 
Residential mortgage
$
14,086

 
$
11,788

 
$
1,154

 
$
9,655

 
$
380

Home equity
2,932

 
1,721

 
676

 
2,002

 
44

Discontinued real estate
608

 
395

 
41

 
389

 
15

(1) 
Interest income recognized includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the ultimate collectability of principal is not uncertain.
n/a = not applicable

The table below presents the December 31, 2011 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of home loans that were modified in TDRs during 2011, along with net charge-offs that were recorded during 2011. The table below consists primarily of TDRs managed by Legacy Asset Servicing.
 
 
 
 
 
 
 
 
 
 
Home Loans - TDRs Entered into During 2011
 
 
 
December 31, 2011
 
2011
(Dollars in millions)
Unpaid Principal Balance
 
Carrying Value
 
Pre-modification Interest Rate
 
Post-modification Interest Rate
 
Net Charge-offs
Residential mortgage
$
10,293

 
$
8,872

 
6.03
%
 
5.28
%
 
$
188

Home equity
899

 
480

 
7.05

 
5.79

 
184

Discontinued real estate
89

 
59

 
7.42

 
5.94

 
3

Total
$
11,281

 
$
9,411

 
6.12

 
5.33

 
$
375



The table below presents the December 31, 2011 carrying value for home loans which were modified in a TDR during 2011. The table below consists primarily of TDRs managed by Legacy Asset Servicing.
 
 
 
 
 
 
 
 
Home Loans - Modification Programs
 
 
 
TDRs Entered into During 2011
(Dollars in millions)
Residential Mortgage
 
 Home Equity
 
 Discontinued Real Estate
 
Total Carrying Value
Modifications under government programs
 
 
 
 
 
 
 
Contractual interest rate reduction
$
969

 
$
181

 
$
9

 
$
1,159

Principal and/or interest forbearance
179

 
36

 
2

 
217

Other modifications (1)
18

 
3

 

 
21

Total modifications under government programs
1,166

 
220

 
11

 
1,397

 
 
 
 
 
 
 
 
Modifications under proprietary programs
 
 
 
 
 
 
 
Contractual interest rate reduction
3,441

 
83

 
20

 
3,544

Capitalization of past due amounts
381

 
1

 
2

 
384

Principal and/or interest forbearance
845

 
47

 
7

 
899

Other modifications (1)
405

 
33

 
1

 
439

Total modifications under proprietary programs
5,072

 
164

 
30

 
5,266

Trial modifications (2)
2,634

 
96

 
18

 
2,748

Total modifications
$
8,872

 
$
480

 
$
59

 
$
9,411

(1)
Includes other modifications such as term or payment extensions and repayment plans.
(2) 
Includes $187 million of trial modifications that were considered TDRs prior to the application of new accounting guidance that was effective in 2011.

The table below presents the carrying value of loans that entered into payment default during 2011 and that were modified in a TDR during the 12 months preceding payment default. A payment default for home loan TDRs is recognized when a borrower has missed three monthly payments (not necessarily consecutively) since modification. Payment default on trial modification where the borrower has not yet met the terms of the agreement are included in the table below if the borrower is 90 days or more past due three months after the offer to modify is made.
 
 
 
 
 
 
 
 
Home Loans - Payment Default
 
 
 
2011
(Dollars in millions)
 Residential Mortgage
 
Home Equity
 
 Discontinued Real Estate
 
Total Carrying Value
Modifications under government programs
$
348

 
$
1

 
$
2

 
$
351

Modifications under proprietary programs
2,068

 
42

 
11

 
2,121

Trial modifications
1,011

 
15

 
5

 
1,031

Total modifications
$
3,427

 
$
58

 
$
18

 
$
3,503


Credit Card and Other Consumer
The credit card and other consumer portfolio segment includes impaired loans that have been modified as a TDR. The Corporation seeks to assist customers that are experiencing financial difficulty by modifying loans while ensuring compliance with federal laws and guidelines. Substantially all of the Corporation’s credit card and other consumer loan modifications involve reducing the interest rate on the account and placing the customer on a fixed payment plan not exceeding 60 months, all of which are considered TDRs. In all cases, the customer’s available line of credit is canceled. The Corporation makes loan modifications directly with borrowers for debt held only by the Corporation (internal programs). Additionally, the Corporation makes loan modifications for borrowers working with third-party renegotiation agencies which provide solutions to customers’ entire unsecured debt structures (external programs).
All credit card and other consumer loans not secured by real estate, including modified loans, remain on accrual status until the loan is either charged-off or paid in full. The allowance for impaired credit card loans is based on the present value of projected cash flows discounted using the portfolio’s average contractual interest rate, excluding promotionally priced loans, in effect prior to restructuring. Prior to modification, credit card and other consumer loans are included in homogeneous pools which are collectively evaluated for impairment. For these portfolios, loss forecast models are utilized that consider a variety of factors including but not limited to historical loss experience, delinquencies, economic trends and credit scores.

The table below provides information on the Corporation’s renegotiated TDR portfolio. At December 31, 2011 and 2010, the renegotiated TDR portfolio was considered impaired and had a related allowance as shown in the table below.
 
 
 
 
 
 
 
 
 
 
Impaired Loans – Credit Card and Other Consumer – Renegotiated TDRs
 
 
 
 
 
December 31, 2011
 
2011
(Dollars in millions)
Unpaid
Principal
Balance
 
Carrying
Value (1)
 
Related
Allowance
 
Average
Carrying
Value
 
Interest
Income
Recognized (2)
With an allowance recorded
 

 
 

 
 

 
 

 
 

U.S. credit card
$
5,272

 
$
5,305

 
$
1,570

 
$
7,211

 
$
433

Non-U.S. credit card
588

 
597

 
435

 
759

 
6

Direct/Indirect consumer
1,193

 
1,198

 
405

 
1,582

 
85

 
 
 
 
 
 
 
 
 
 
 
December 31, 2010
 
2010
With an allowance recorded
 
 
 
 
 
 
 
 
 
U.S. credit card
$
8,680

 
$
8,766

 
$
3,458

 
$
10,549

 
$
621

Non-U.S. credit card
778

 
797

 
506

 
973

 
21

Direct/Indirect consumer
1,846

 
1,858

 
822

 
2,126

 
111

(1) 
Includes accrued interest and fees.
(2) 
Interest income recognized includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the ultimate collectability of principal is not uncertain.

The table below provides information on the Corporation’s primary modification programs for the renegotiated TDR portfolio at December 31, 2011 and 2010.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Card and Other Consumer – Renegotiated TDR Portfolio by Program Type
 
 
 
 
 
 
 
 
 
 
 
Internal Programs
 
External Programs
 
Other (1)
 
Total
 
Percent of Balances Current or Less Than 30 Days Past Due
 
December 31
 
December 31
 
December 31
 
December 31
 
December 31
(Dollars in millions)
2011
 
2010
 
2011
 
2010
 
2011
 
2010
 
2011
 
2010
 
2011
 
2010
U.S. credit card
$
3,788

 
$
6,592

 
$
1,436

 
$
1,927

 
$
81

 
$
247

 
$
5,305

 
$
8,766

 
78.97
%
 
77.66
%
Non-U.S. credit card
218

 
282

 
113

 
176

 
266

 
339

 
597

 
797

 
54.02

 
58.86

Direct/Indirect consumer
784

 
1,222

 
392

 
531

 
22

 
105

 
1,198

 
1,858

 
80.01

 
78.81

Total renegotiated TDR loans
$
4,790

 
$
8,096

 
$
1,941

 
$
2,634

 
$
369

 
$
691

 
$
7,100

 
$
11,421

 
77.05

 
76.51

(1) 
Other programs include ineligible U.K. credit card and other consumer loans.

At December 31, 2011 and 2010, the Corporation had a renegotiated TDR portfolio of $7.1 billion and $11.4 billion of which $5.5 billion was current or less than 30 days past due under the modified terms at December 31, 2011. The renegotiated TDR portfolio is excluded from nonperforming loans as the Corporation generally does not classify consumer loans not secured by real estate as nonperforming. Instead, these loans are charged off no later than the end of the month in which the loan becomes 180 days past due.
The table below provides information on the Corporation’s renegotiated TDR portfolio including the unpaid principal balance and carrying value of loans that were modified in TDRs during 2011, along with charge-offs that were recorded during 2011. The table also presents the average pre- and post-modification interest rate.
 
 
 
 
 
 
 
 
 
 
Credit Card and Other Consumer – Renegotiated TDRs Entered into During 2011
 
 
 
December 31, 2011
 
2011
(Dollars in millions)
Unpaid Principal Balance
 
Carrying Value (1)
 
Pre-modification Interest Rate
 
Post-modification Interest Rate
 
Net Charge-offs
U.S. credit card
$
890

 
$
902

 
19.04
%
 
6.16
%
 
$
44

Non-U.S. credit card
305

 
322

 
26.32

 
1.04

 
126

Direct/Indirect consumer
198

 
199

 
15.63

 
5.22

 
10

Total
$
1,393

 
$
1,423

 
20.20

 
4.87

 
$
180

(1) 
Includes accrued interest and fees.
The table below provides information on the Corporation’s primary modification programs for the renegotiated TDR portfolio for loans that were modified in TDRs during 2011.
 
 
 
 
 
 
 
 
Credit Card and Other Consumer – Renegotiated TDRs by Program Type
 
 
 
Renegotiated TDRs Entered into During 2011
 
December 31, 2011
(Dollars in millions)
Internal Programs
 
External Programs
 
Other
 
Total
U.S. credit card
$
492

 
$
407

 
$
3

 
$
902

Non-U.S. credit card
163

 
158

 
1

 
322

Direct/Indirect consumer
112

 
87

 

 
199

Total renegotiated TDR loans
$
767

 
$
652

 
$
4

 
$
1,423



Credit card and other consumer loans are deemed to be in payment default during the quarter in which a borrower misses the second of two consecutive payments. Payment defaults are one of the factors considered when projecting future cash flows in the calculation of the allowance for loan losses for impaired credit card and other consumer loans. Loans that entered into payment default during 2011 and that had been modified in a TDR during the 12 months preceding payment default were $863 million for U.S. credit card, $409 million for non-U.S. credit card and $180 million for direct/indirect consumer.
Commercial Loans
Impaired commercial loans, which include nonperforming loans and TDRs (both performing and nonperforming) are primarily measured based on the present value of payments expected to be received, discounted at the loan’s original effective interest rate. Commercial impaired loans may also be measured based on observable market prices or, for loans that are solely dependent on the collateral for repayment, the estimated fair value of collateral less estimated costs to sell. If the carrying value of a loan exceeds this amount, a specific allowance is recorded as a component of the allowance for loan and lease losses.
Modifications of loans to commercial borrowers that are experiencing financial difficulty are designed to reduce the Corporation’s loss exposure while providing the borrower with an opportunity to work through financial difficulties, often to avoid foreclosure or bankruptcy. Each modification is unique and reflects the individual circumstances of the borrower. Modifications that result in a TDR may include extensions of maturity at a concessionary (below market) rate of interest, payment forbearances or other actions designed to benefit the customer while mitigating the Corporation’s risk exposure. Reductions in interest rates are rare. Instead, the interest rates are typically increased, although the increased rate may not represent a market rate of interest. Infrequently, concessions may also include principal forgiveness in connection with foreclosure, short sale or other settlement agreements leading to termination or sale of the loan.
At the time of restructuring, the loans are remeasured to reflect the impact, if any, on projected cash flows, observable market prices or collateral value resulting from the modified terms. If there was no forgiveness of principal and the interest rate was not decreased, the modification may have little or no impact on the allowance established for the loan. If a portion of the loan is deemed to be uncollectible, a charge-off may be recorded at the time of restructuring. Alternatively, a charge-off may have already been recorded in a previous period such that no charge-off is required at the time of modification.
At December 31, 2011 and 2010, remaining commitments to lend additional funds to debtors whose terms have been modified in a commercial loan TDR were immaterial. Commercial foreclosed properties totaled $612 million and $725 million at December 31, 2011 and 2010.

The table below presents impaired loans in the Corporation’s commercial loan portfolio at December 31, 2011 and 2010. Certain impaired commercial loans do not have a related allowance as the valuation of these impaired loans exceeded the carrying value, which is net of previously recorded charge-offs.
 
 
 
 
 
 
 
 
 
 
Impaired Loans – Commercial
 
 
 
 
 
December 31, 2011
 
2011
(Dollars in millions)
Unpaid
Principal
Balance
 
Carrying
Value
 
Related
Allowance
 
Average
Carrying
Value
 
Interest
Income
Recognized (1)
With no recorded allowance
 

 
 

 
 

 
 

 
 

U.S. commercial
$
1,482

 
$
985

 
n/a

 
$
774

 
$
7

Commercial real estate
2,587

 
2,095

 
n/a

 
1,994

 
7

Non-U.S. commercial
216

 
101

 
n/a

 
101

 

U.S. small business commercial (2)

 

 
n/a

 

 

With an allowance recorded
 
 
 
 
 
 
 
 
 
U.S. commercial
$
2,654

 
$
1,987

 
$
232

 
$
2,422

 
$
13

Commercial real estate
3,329

 
2,384

 
135

 
3,309

 
19

Non-U.S. commercial
308

 
58

 
6

 
76

 
3

U.S. small business commercial (2)
531

 
503

 
172

 
666

 
23

Total
 

 
 

 
 

 
 

 
 

U.S. commercial
$
4,136

 
$
2,972

 
$
232

 
$
3,196

 
$
20

Commercial real estate
5,916

 
4,479

 
135

 
5,303

 
26

Non-U.S. commercial
524

 
159

 
6

 
177

 
3

U.S. small business commercial (2)
531

 
503

 
172

 
666

 
23

 
 
 
 
 
 
 
 
 
 
 
December 31, 2010
 
2010
With no recorded allowance
 
 
 
 
 
 
 
 
 
U.S. commercial
$
968

 
$
441

 
n/a

 
$
547

 
$
3

Commercial real estate
2,655

 
1,771

 
n/a

 
1,736

 
8

Non-U.S. commercial
46

 
28

 
n/a

 
9

 

U.S. small business commercial (2)

 

 
n/a

 

 

With an allowance recorded
 
 
 
 
 
 
 
 
 
U.S. commercial
$
3,891

 
$
3,193

 
$
336

 
$
3,389

 
$
36

Commercial real estate
5,682

 
4,103

 
208

 
4,813

 
29

Non-U.S. commercial
572

 
217

 
91

 
190

 

U.S. small business commercial (2)
935

 
892

 
445

 
1,028

 
34

Total
 
 
 
 
 
 
 
 
 
U.S. commercial
$
4,859

 
$
3,634

 
$
336

 
$
3,936

 
$
39

Commercial real estate
8,337

 
5,874

 
208

 
6,549

 
37

Non-U.S. commercial
618

 
245

 
91

 
199

 

U.S. small business commercial (2)
935

 
892

 
445

 
1,028

 
34

(1) 
Interest income recognized includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the ultimate collectability of principal is not uncertain.
(2) 
Includes U.S. small business commercial renegotiated TDR loans and related allowance.
n/a = not applicable

The Commercial table below presents the December 31, 2011 unpaid principal balance and carrying value of commercial loans that were modified as TDRs during 2011, along with charge-offs that were recorded during 2011. As a result of the retrospective application of new accounting guidance on TDRs, the Corporation classified as TDRs $1.1 billion of commercial loan modifications. See Note 1 – Summary of Significant Accounting Principles for additional information.
 
 
 
 
 
 
Commercial - TDRs Entered into During 2011
 
 
 
 
 
December 31, 2011
 
2011
(Dollars in millions)
Unpaid Principal Balance
 
Carrying Value
 
Net Charge-offs
U.S commercial
$
1,381

 
$
1,211

 
$
74

Commercial real estate
1,604

 
1,333

 
152

Non-U.S. commercial
44

 
44

 

U.S. small business commercial
58

 
59

 
10

Total
$
3,087

 
$
2,647

 
$
236



A commercial TDR is generally deemed to be in payment default when the loan is 90 days or more past due, including delinquencies that were not resolved as part of the modification. U.S. small business commercial TDRs are deemed to be in payment default during the quarter in which a borrower misses the second of two consecutive payments. Payment defaults are one of the factors considered when projecting future cash flows, along with observable market prices or fair value of collateral when measuring the allowance for loan losses. TDRs that were in payment default at December 31, 2011 had a carrying value of $164 million for U.S. commercial, $446 million for commercial real estate and $68 million for U.S. small business commercial.
Purchased Credit-impaired Loans
PCI loans are acquired loans with evidence of credit quality deterioration since origination for which it is probable at purchase date that the Corporation will be unable to collect all contractually required payments. PCI loans are pooled based on similar characteristics and evaluated for impairment on a pool basis. The Corporation estimates impairment on its PCI loan portfolio in accordance with applicable accounting guidance on contingencies which involves estimating the expected cash flows of each pool using internal credit risk, interest rate and prepayment risk models. The key assumptions used in the models include the Corporation’s estimate of default rates, loss severity and prepayment speeds. The carrying value and valuation allowance for Countrywide consumer PCI loans are presented together with the allowance for loan and lease losses. See Note 7 – Allowance for Credit Losses for additional information.
The table below shows activity for the accretable yield on Countrywide consumer PCI loans. The $912 million reclassification from nonaccretable difference during 2011 is primarily due to an increase in the expected life of the PCI loans. The reclassification did not increase the annual yield but, as a result of estimated slower prepayment speeds, added additional interest periods to the expected cash flows.
 
 

Rollforward of Accretable Yield
 
 
 
(Dollars in millions)
 

Accretable yield, January 1, 2010
$
7,317

Accretion
(1,704
)
Disposals/transfers
(124
)
Reclassifications to nonaccretable difference
(8
)
Accretable yield, December 31, 2010
5,481

Accretion
(1,285
)
Disposals/transfers
(118
)
Reclassifications from nonaccretable difference
912

Accretable yield, December 31, 2011
$
4,990


Loans Held-for-Sale
The Corporation had LHFS of $13.8 billion and $35.1 billion at December 31, 2011 and 2010. Proceeds from sales, securitizations and paydowns of LHFS were $147.5 billion, $281.7 billion and $365.1 billion for 2011, 2010 and 2009. Proceeds used for originations and purchases of LHFS were $118.2 billion, $263.0 billion and $369.4 billion for 2011, 2010 and 2009.