Bank of America Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Outstanding Loans and Leases

Outstanding Loans and Leases

12 Months Ended

Dec. 31, 2012

Loans and Leases Receivable Disclosure [Abstract]

The following tables present total outstanding loans and leases and an aging analysis for the Corporation’s Home Loans, Credit Card and Other Consumer, and Commercial portfolio segments, by class of financing receivables, at December 31, 2012 and 2011.




	December 31, 2012
(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⁾	$	2,274		$	806		$	6,227		$	9,307		$	160,809								$	170,116
Home equity	273			146			591			1,010			59,841									60,851
Legacy Assets & Servicing portfolio
Residential mortgage	2,891			1,696			26,494			31,081			33,247			$	8,737					73,065
Home equity	607			356			1,444			2,407			36,191			8,547						47,145
Discontinued real estate ⁽⁶⁾	48			19			234			301			757			8,834						9,892
Credit card and other consumer
U.S. credit card	729			582			1,437			2,748			92,087									94,835
Non-U.S. credit card	106			85			212			403			11,294									11,697
Direct/Indirect consumer ⁽⁷⁾	569			239			573			1,381			81,824									83,205
Other consumer ⁽⁸⁾	48			19			4			71			1,557									1,628
Total consumer loans	7,545			3,948			37,216			48,709			477,607			26,118						552,434
Consumer loans accounted for under the fair value option ⁽⁹⁾																			$	1,005		1,005
Total consumer	7,545			3,948			37,216			48,709			477,607			26,118			1,005			553,439
Commercial
U.S. commercial	323			133			639			1,095			196,031									197,126
Commercial real estate ⁽¹⁰⁾	79			144			983			1,206			37,431									38,637
Commercial lease financing	84			79			30			193			23,650									23,843
Non-U.S. commercial	2			—			—			2			74,182									74,184
U.S. small business commercial	101			75			168			344			12,249									12,593
Total commercial loans	589			431			1,820			2,840			343,543									346,383
Commercial loans accounted for under the fair value option ⁽⁹⁾																			7,997			7,997
Total commercial	589			431			1,820			2,840			343,543						7,997			354,380
Total loans and leases	$	8,134		$	4,379		$	39,036		$	51,549		$	821,150		$	26,118		$	9,002		$	907,819
Percentage of outstandings	0.90		%	0.48		%	4.30		%	5.68		%	90.45		%	2.88		%	0.99		%


⁽¹⁾	Home loans 30-59 days past due includes $2.3 billion of fully-insured loans and $702 million of nonperforming loans. Home loans 60-89 days past due includes $1.3 billion of fully-insured loans and $558 million of nonperforming loans.


⁽²⁾	Home loans includes $22.2 billion of fully-insured loans.


⁽³⁾	Home loans includes $5.5 billion and direct/indirect consumer includes $63 million of nonperforming loans.


⁽⁴⁾	PCI loan amounts are shown gross of the valuation allowance.


⁽⁵⁾	Total outstandings includes non-U.S. residential mortgage loans of $93 million.


⁽⁶⁾	Total outstandings includes $8.8 billion of pay option loans and $1.1 billion of subprime loans. The Corporation no longer originates these products.


⁽⁷⁾	Total outstandings includes dealer financial services loans of $35.9 billion, consumer lending loans of $4.7 billion, U.S. securities-based lending margin loans of $28.3 billion, student loans of $4.8 billion, non-U.S. consumer loans of $8.3 billion and other consumer loans of $1.2 billion.


⁽⁸⁾	Total outstandings includes consumer finance loans of $1.4 billion, other non-U.S. consumer loans of $5 million and consumer overdrafts of $177 million.

⁽⁹⁾

Consumer loans accounted for under the fair value option were residential mortgage loans of $147 million and discontinued real estate loans of $858 million. Commercial loans accounted for under the fair value option were U.S. commercial loans of $2.3 billion and non-U.S. commercial loans of $5.7 billion. For additional information, see Note 21 – Fair Value Measurements and Note 22 – Fair Value Option.


⁽¹⁰⁾	Total outstandings includes U.S. commercial real estate loans of $37.2 billion and non-U.S. commercial real estate loans of $1.5 billion.




	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 Assets & 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	352			166			866			1,384			178,564									179,948
Commercial real estate ⁽¹⁰⁾	288			118			1,860			2,266			37,330									39,596
Commercial lease financing	78			15			22			115			21,874									21,989
Non-U.S. commercial	24			—			—			24			55,394									55,418
U.S. small business commercial	150			106			272			528			12,723									13,251
Total commercial loans	892			405			3,020			4,317			305,885									310,202
Commercial loans accounted for under the fair value option ⁽⁹⁾																			6,614			6,614
Total commercial	892			405			3,020			4,317			305,885						6,614			316,816
Total loans and leases	$	9,397		$	5,268		$	43,927		$	58,592		$	827,003		$	31,801		$	8,804		$	926,200
Percentage of outstandings	1.02		%	0.57		%	4.74		%	6.33		%	89.29		%	3.43		%	0.95		%


⁽¹⁾	Home loans 30-59 days past due includes $2.2 billion of fully-insured loans and $372 million of nonperforming loans. Home loans 60-89 days past due includes $1.4 billion of fully-insured loans and $398 million of nonperforming loans.


⁽²⁾	Home loans includes $21.2 billion of fully-insured loans.


⁽³⁾	Home loans includes $1.8 billion and direct/indirect consumer includes $7 million of nonperforming loans.


⁽⁴⁾	PCI loan amounts are shown gross of the valuation allowance.


⁽⁵⁾	Total outstandings includes non-U.S. residential mortgage loans of $85 million.


⁽⁶⁾	Total outstandings includes $9.9 billion of pay option loans and $1.2 billion of subprime loans. 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.


⁽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.

⁽⁹⁾

Consumer loans accounted for under the fair value option were residential mortgage loans of $906 million and discontinued real estate loans of $1.3 billion. Commercial loans accounted for under the fair value option were U.S. commercial loans of $2.2 billion and non-U.S. commercial loans of $4.4 billion. For additional information, see Note 21 – Fair Value Measurements and Note 22 – Fair Value Option.


⁽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.

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 mortgage loans 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 $500 million and $783 million at December 31, 2012 and 2011. The vehicles from which the Corporation purchases credit protection are VIEs. The Corporation does not have a variable interest in these vehicles, and 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, 2012 and 2011, the Corporation had a receivable of $305 million and $359 million from these vehicles for reimbursement of losses, and principal of $17.6 billion and $23.9 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 loans totaling $24.3 billion and $24.4 billion at December 31, 2012 and 2011, 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. For additional information, see Note 8 – Representations and Warranties Obligations and Corporate Guarantees.

Nonperforming Loans and Leases

In 2012, the bank regulatory agencies jointly issued interagency supervisory guidance on nonaccrual status for junior-lien consumer real estate loans. In accordance with this regulatory interagency guidance, the Corporation classifies junior-lien home equity loans as nonperforming when the first-lien loan becomes 90 days past due even if the junior-lien loan is performing, and as a result, an incremental $1.5 billion was included in nonperforming loans at December 31, 2012. The regulatory interagency guidance had no impact on the Corporation’s allowance for loan and lease losses or provision for credit losses as the delinquency status of the underlying first-lien loans was already considered in the Corporation’s reserving process.

In 2012, new regulatory guidance was issued addressing certain consumer real estate loans that have been discharged in Chapter 7 bankruptcy. In accordance with this new guidance, the Corporation classifies consumer real estate and other secured consumer loans that have been discharged in Chapter 7 bankruptcy and not reaffirmed by the borrower as TDRs, irrespective of payment history or delinquency status, even if the repayment terms for the loan have not been otherwise modified. The Corporation continues to have a lien on the underlying collateral. Previously, such loans were classified as TDRs only if there had been a change in contractual payment terms that represented a concession to the borrower. The net impact upon implementation to the consumer loan portfolio of adopting this new regulatory guidance was $1.2 billion in net new nonperforming loans, and $1.1 billion of such loans were included in nonperforming loans at December 31, 2012. Of the $1.1 billion, $1.0 billion, or 92 percent, were current on their contractual payments. Of these contractually current nonperforming loans, more than 70 percent were discharged in Chapter 7 bankruptcy more than 12 months ago, and more than 40 percent were discharged 24 months or more ago. As subsequent cash payments are received, the interest component of the payments is generally recorded as interest income on a cash basis and the principal component is generally recorded as a reduction in the carrying value of the loan.

The table below presents the Corporation’s nonperforming loans and leases including nonperforming TDRs and loans accruing past due 90 days or more at December 31, 2012 and 2011. 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. See Note 1 – Summary of Significant Accounting Principles for further information on the criteria for classification as nonperforming.




Credit Quality

	December 31
	Nonperforming Loans and Leases ⁽¹⁾				Accruing Past Due 90 Days or More
(Dollars in millions)	2012		2011		2012		2011
Home loans
Core portfolio
Residential mortgage ⁽²⁾	$	3,190	$	2,414	$	3,984	$	883
Home equity	1,265		439		—		—
Legacy Assets & Servicing portfolio
Residential mortgage⁽²⁾	11,618		13,556		18,173		20,281
Home equity	3,016		2,014		—		—
Discontinued real estate	248		290		—		—
Credit card and other consumer
U.S. credit card	n/a		n/a		1,437		2,070
Non-U.S. credit card	n/a		n/a		212		342
Direct/Indirect consumer	92		40		545		746
Other consumer	2		15		2		2
Total consumer	19,431		18,768		24,353		24,324
Commercial
U.S. commercial	1,484		2,174		65		75
Commercial real estate	1,513		3,880		29		7
Commercial lease financing	44		26		15		14
Non-U.S. commercial	68		143		—		—
U.S. small business commercial	115		114		120		216
Total commercial	3,224		6,337		229		312
Total consumer and commercial	$	22,655	$	25,105	$	24,582	$	24,636


⁽¹⁾	Nonperforming loan balances do not include nonaccruing TDRs removed from the PCI portfolio prior to January 1, 2010 of $521 million and $477 million at December 31, 2012 and 2011.

⁽²⁾

Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At December 31, 2012 and 2011, residential mortgage includes $17.8 billion and $17.0 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 $4.4 billion and $4.2 billion of loans on which interest is still accruing.

n/a = not applicable

Credit Quality Indicators

The Corporation monitors credit quality within its Home Loans, Credit Card and Other Consumer, and Commercial 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. 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. FICO scores are 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. Within the Commercial portfolio segment, 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, and Commercial portfolio segments, by class of financing receivables, at December 31, 2012 and 2011.




Home Loans – Credit Quality Indicators ⁽¹⁾

	December 31, 2012
(Dollars in millions)	Core Portfolio Residential Mortgage ⁽²⁾		Legacy Assets & Servicing Residential Mortgage ⁽²⁾		Countrywide Residential Mortgage PCI		Core Portfolio Home Equity ⁽²⁾		Legacy Assets & Servicing Home Equity ⁽²⁾		Countrywide Home Equity PCI		Legacy Assets & Servicing Discontinued Real Estate ⁽²⁾		Countrywide Discontinued Real Estate PCI
Refreshed LTV⁽³⁾
Less than 90 percent	$	80,585	$	19,904	$	3,516	$	44,971	$	15,907	$	2,050	$	719	$	5,093
Greater than 90 percent but less than 100 percent	8,891		5,000		1,312		5,825		4,507		788		102		1,067
Greater than 100 percent	12,984		16,226		3,909		10,055		18,184		5,709		237		2,674
Fully-insured loans ⁽⁴⁾	67,656		23,198		—		—		—		—		—		—
Total home loans	$	170,116	$	64,328	$	8,737	$	60,851	$	38,598	$	8,547	$	1,058	$	8,834
Refreshed FICO score
Less than 620	$	6,366	$	13,900	$	3,249	$	2,586	$	5,408	$	1,930	$	429	$	5,471
Greater than or equal to 620 and less than 680	8,561		6,006		1,381		4,500		5,885		1,500		160		1,359
Greater than or equal to 680 and less than 740	25,141		8,411		1,886		12,625		10,387		2,278		206		1,106
Greater than or equal to 740	62,392		12,813		2,221		41,140		16,918		2,839		263		898
Fully-insured loans ⁽⁴⁾	67,656		23,198		—		—		—		—		—		—
Total home loans	$	170,116	$	64,328	$	8,737	$	60,851	$	38,598	$	8,547	$	1,058	$	8,834


⁽¹⁾	Excludes $1.0 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 net 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, 2012
(Dollars in millions)	U.S. Credit Card		Non-U.S. Credit Card		Direct/Indirect Consumer		Other Consumer ⁽¹⁾
Refreshed FICO score
Less than 620	$	6,188	$	—	$	1,896	$	668
Greater than or equal to 620 and less than 680	13,947		—		3,367		301
Greater than or equal to 680 and less than 740	37,167		—		9,592		232
Greater than or equal to 740	37,533		—		25,164		212
Other internal credit metrics ^{(2, 3, 4)}	—		11,697		43,186		215
Total credit card and other consumer	$	94,835	$	11,697	$	83,205	$	1,628


⁽¹⁾	87 percent of the other consumer portfolio is 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 $36.5 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $4.8 billion of loans the Corporation no longer originates.


⁽⁴⁾	Non-U.S. credit card represents the U.K. credit card portfolio which is evaluated using internal credit metrics, including delinquency status. At December 31, 2012, 97 percent of this portfolio was current or less than 30 days past due, one percent was 30-89 days past due and two percent was 90 days or more past due.




Commercial – Credit Quality Indicators ⁽¹⁾

	December 31, 2012
(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	$	189,602	$	34,968	$	22,874	$	72,688	$	1,690
Reservable criticized	7,524		3,669		969		1,496		573
Refreshed FICO score ⁽³⁾
Less than 620									400
Greater than or equal to 620 and less than 680									580
Greater than or equal to 680 and less than 740									1,553
Greater than or equal to 740									2,496
Other internal credit metrics ^{(3, 4)}									5,301
Total commercial	$	197,126	$	38,637	$	23,843	$	74,184	$	12,593


⁽¹⁾	Excludes $8.0 billion of loans accounted for under the fair value option.


⁽²⁾	U.S. small business commercial includes $366 million of criticized business card and small business loans which are evaluated using refreshed FICO scores or internal credit metrics, including delinquency status, rather than risk ratings. At December 31, 2012, 98 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 ⁽¹⁾

	December 31, 2011
(Dollars in millions)	Core Portfolio Residential Mortgage ⁽²⁾		Legacy Assets & Servicing Residential Mortgage ⁽²⁾		Countrywide Residential Mortgage PCI		Core Portfolio Home Equity ⁽²⁾		Legacy Assets & Servicing Home Equity ⁽²⁾		Countrywide Hone Equity PCI		Legacy Assets & 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 ⁽⁵⁾
Less than 620	$	7,020	$	17,337	$	3,924	$	2,843	$	7,293	$	4,140	$	548	$	6,275
Greater than or equal to 620 and less than 680	9,331		6,537		1,381		4,704		6,866		1,969		175		1,279
Greater than or equal to 680 and less than 740	26,569		9,439		2,036		13,561		11,798		2,538		228		1,223
Greater than or equal to 740	66,623		15,614		2,625		45,947		19,709		3,331		287		1,080
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 net of the related valuation allowance.


⁽⁴⁾	Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.


⁽⁵⁾	During 2012, refreshed home equity FICO metrics reflected an updated scoring model that is more representative of the credit risk of the Corporation’s borrowers. Prior period amounts were adjusted to reflect these updates.




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 and less than 680	15,474		—		4,665		348
Greater than or equal to 680 and less than 740	39,525		—		12,351		262
Greater than or equal to 740	39,120		—		29,965		244
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 is 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 U.K. credit card portfolio which is 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 and less than 680									624
Greater than or equal to 680 and less than 740									1,612
Greater than or equal to 740									2,438
Other internal credit metrics ^{(3, 4)}									4,787
Total commercial	$	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 refreshed 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.

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 and all consumer and commercial TDRs. 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 201.

Home Loans

Impaired home loans within the Home Loans portfolio segment consist entirely of TDRs. Excluding PCI loans, most modifications of home loans meet the definition of TDRs when a binding offer is extended to a borrower. 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. In 2012, the Corporation implemented a borrower assistance program that provides forgiveness of principal balances in connection with the settlement agreement among the Corporation and certain of its affiliates and subsidiaries, together with the U.S. Department of Justice (DOJ), the U.S. Department of Housing and Urban Development (HUD) and other federal agencies, and 49 state Attorneys General concerning the terms of a global settlement resolving investigations into certain origination, servicing and foreclosure practices (National Mortgage Settlement).

Prior to permanently modifying a loan, the Corporation may enter into trial modifications with certain borrowers under both government and proprietary programs, including the borrower assistance program pursuant to the National Mortgage Settlement. 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. Binding trial modifications are classified as TDRs when the trial offer is made and continue to be classified as TDRs regardless of whether the borrower enters into a permanent modification.

In 2012, new regulatory guidance was issued addressing certain home loans that have been discharged in Chapter 7 bankruptcy, and as a result, an additional $3.5 billion of home loans were included in TDRs at December 31, 2012, of which $1.2 billion were current or less than 60 days past due. Of the $3.5 billion of home loan TDRs, approximately 27 percent, 42 percent and 31 percent had been discharged in Chapter 7 bankruptcy in 2012, 2011 and prior years, respectively. For more information on the new regulatory guidance on loans discharged in Chapter 7 bankruptcy, see Nonperforming Loans and Leases in this Note.

In accordance with applicable accounting guidance, a home loan, excluding PCI loans which are reported separately, is not classified as impaired unless it is 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, as discussed in the paragraph below. 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 or as a result of being discharged in Chapter 7 bankruptcy) 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 had been charged off to their net realizable value before they were modified as TDRs in accordance with established policy. Therefore, modifications of home loans that are 180 days or more past due as TDRs do not have an impact on the allowance for loan and lease 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 loan and lease 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 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, 2012 and 2011, 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 $650 million and $2.0 billion at December 31, 2012 and 2011.

The table below presents impaired loans in the Corporation’s Home Loans portfolio segment at and for the years ended December 31, 2012 and 2011 and includes primarily loans managed by Legacy Assets & 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, 2012						2012
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Related Allowance		Average Carrying Value		Interest Income Recognized ⁽¹⁾
With no recorded allowance
Residential mortgage	$	19,758	$	14,707	n/a		$	10,697	$	358
Home equity	2,624		1,103		n/a		734		49
Discontinued real estate	468		260		n/a		240		8
With an allowance recorded
Residential mortgage	14,080		13,051		$	1,233	11,439		417
Home equity	1,256		1,022		448		1,145		44
Discontinued real estate	143		107		19		136		6
Total
Residential mortgage	$	33,838	$	27,758	$	1,233	$	22,136	$	775
Home equity	3,880		2,125		448		1,879		93
Discontinued real estate	611		367		19		376		14

	December 31, 2011						2011
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


⁽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 principal is considered collectible.

n/a = not applicable

The table below presents the December 31, 2012 and 2011 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of home loans that were modified in TDRs during 2012 and 2011, and net charge-offs that were recorded during the period in which the modification occurred. The following Home Loans portfolio segment tables include loans that were initially classified as TDRs during the period and also loans that had previously been classified as TDRs and were modified again during the period. These TDRs are managed by Legacy Assets & Servicing.




Home Loans – TDRs Entered into During 2012 and 2011 ⁽¹⁾

	December 31, 2012								2012
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Pre-modification Interest Rate		Post-modification Interest Rate		Net Charge-offs
Residential mortgage	$	14,929	$	12,143	5.52	%	4.70	%	$	507
Home equity	1,721		858		5.22		4.39		716
Discontinued real estate	159		85		5.21		4.35		16
Total	$	16,809	$	13,086	5.49		4.66		$	1,239

	December 31, 2011								2011
Residential mortgage	$	11,623	$	9,903	5.94	%	5.16	%	$	299
Home equity	1,112		556		6.58		5.25		239
Discontinued real estate	141		88		6.68		5.08		9
Total	$	12,876	$	10,547	6.01		5.17		$	547


⁽¹⁾	TDRs entered into during 2012 include principal forgiveness as follows: residential mortgage modifications of $755 million, home equity modifications of $9 million and discontinued real estate modifications of $23 million. Prior to 2012, the principal forgiveness amount was not significant.

The table below presents the December 31, 2012 and 2011 carrying value for home loans that were modified in TDRs during 2012 and 2011 by type of modification.




Home Loans – Modification Programs

	TDRs Entered into During 2012
(Dollars in millions)	Residential Mortgage		Home Equity		Discontinued Real Estate		Total Carrying Value
Modifications under government programs
Contractual interest rate reduction	$	638	$	78	$	4	$	720
Principal and/or interest forbearance	49		31		2		82
Other modifications ⁽¹⁾	37		1		—		38
Total modifications under government programs	724		110		6		840
Modifications under proprietary programs
Contractual interest rate reduction	3,343		44		7		3,394
Capitalization of past due amounts	143		—		1		144
Principal and/or interest forbearance	415		16		9		440
Other modifications⁽¹⁾	97		21		—		118
Total modifications under proprietary programs	3,998		81		17		4,096
Trial modifications	4,505		69		42		4,616
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	2,916		598		20		3,534
Total modifications	$	12,143	$	858	$	85	$	13,086

	TDRs Entered into During 2011
Modifications under government programs
Contractual interest rate reduction	$	984	$	189	$	10	$	1,183
Principal and/or interest forbearance	187		36		2		225
Other modifications ⁽¹⁾	64		5		—		69
Total modifications under government programs	1,235		230		12		1,477
Modifications under proprietary programs
Contractual interest rate reduction	3,508		101		23		3,632
Capitalization of past due amounts	408		1		2		411
Principal and/or interest forbearance	936		49		10		995
Other modifications⁽¹⁾	439		34		2		475
Total modifications under proprietary programs	5,291		185		37		5,513
Trial modifications	3,377		141		39		3,557
Total modifications	$	9,903	$	556	$	88	$	10,547


⁽¹⁾	Includes other modifications such as term or payment extensions and repayment plans.


⁽²⁾	Includes loans newly classified as TDRs in accordance with new regulatory guidance on loans discharged in Chapter 7 bankruptcy that was issued in 2012.

The table below presents the carrying value of loans that entered into payment default during 2012 and 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 – TDRs Entering Payment Default That Were Modified During the Preceding Twelve Months

	2012
(Dollars in millions)	Residential Mortgage		Home Equity		Discontinued Real Estate		Total Carrying Value
Modifications under government programs	$	200	$	8	$	2	$	210
Modifications under proprietary programs	933		14		9		956
Loans discharged in Chapter 7 bankruptcy ⁽¹⁾	1,216		53		12		1,281
Trial modifications	2,323		20		28		2,371
Total modifications	$	4,672	$	95	$	51	$	4,818

	2011
Modifications under government programs	$	350	$	2	$	2	$	354
Modifications under proprietary programs	2,086		42		12		2,140
Trial modifications	1,094		17		7		1,118
Total modifications	$	3,530	$	61	$	21	$	3,612


⁽¹⁾	Includes loans classified as TDRs at December 31, 2012 due to loans discharged in Chapter 7 bankruptcy in 2012 or 2011.

Credit Card and Other Consumer

Impaired loans within the Credit Card and Other Consumer portfolio segment consist entirely of loans that have been modified in TDRs (the renegotiated credit card and other consumer TDR portfolio collectively referred to as the renegotiated TDR portfolio). 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 that provide solutions to customers’ entire unsecured debt structures (external programs).

In 2012, new regulatory guidance was issued addressing certain consumer real estate loans that have been discharged in Chapter 7 bankruptcy. The Corporation applies this guidance to other secured consumer loans that have been discharged in Chapter 7 bankruptcy, and such loans are classified as TDRs, written down to collateral value and placed on nonaccrual status no later than the time of discharge.

All credit card and substantially all other consumer loans that have been modified in TDRs remain on accrual status until the loan is either paid in full or charged off, which occurs no later than the end of the month in which the loan becomes 180 days past due or 120 days past due for a loan that was placed on a fixed payment plan after July 1, 2012.

The allowance for impaired credit card loans is based on the present value of projected cash flows, which incorporates the Corporation’s historical payment default and loss experience on modified loans, 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 and for the years ended December 31, 2012 and 2011.




Impaired Loans – Credit Card and Other Consumer – Renegotiated TDRs

	December 31, 2012						2012
(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	$	2,856	$	2,871	$	719	$	4,085	$	253
Non-U.S. credit card	311		316		198		464		10
Direct/Indirect consumer	633		636		210		929		50
Without an allowance recorded
Direct/Indirect consumer	105		58		—		58		—
Total
U.S. credit card	$	2,856	$	2,871	$	719	$	4,085	$	253
Non-U.S. credit card	311		316		198		464		10
Direct/Indirect consumer	738		694		210		987		50

	December 31, 2011						2011
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


⁽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 principal is considered collectible.

The table below provides information on the Corporation’s primary modification programs for the renegotiated TDR portfolio at December 31, 2012 and 2011.




Credit Card and Other Consumer – Renegotiated TDRs by Program Type

	December 31
	Internal Programs				External Programs				Other				Total				Percent of Balances Current or Less Than 30 Days Past Due
(Dollars in millions)	2012		2011		2012		2011		2012		2011		2012		2011		2012		2011
U.S. credit card	$	1,887	$	3,788	$	953	$	1,436	$	31	$	81	$	2,871	$	5,305	81.48	%	78.97	%
Non-U.S. credit card	99		218		38		113		179		266		316		597		43.71		54.02
Direct/Indirect consumer	405		784		225		392		64		22		694		1,198		83.11		80.01
Total renegotiated TDRs	$	2,391	$	4,790	$	1,216	$	1,941	$	274	$	369	$	3,881	$	7,100	78.69		77.05

At December 31, 2012 and 2011, the Corporation had a renegotiated TDR portfolio of $3.9 billion and $7.1 billion of which $3.1 billion was current or less than 30 days past due under the modified terms at December 31, 2012.

The table below provides information on the Corporation’s renegotiated TDR portfolio including the unpaid principal balance, carrying value and average pre- and post-modification interest rates of loans that were modified in TDRs during 2012 and 2011, and net charge-offs that were recorded during the period in which the modification occurred.




Credit Card and Other Consumer – Renegotiated TDRs Entered into During 2012 and 2011

	December 31, 2012								2012
(Dollars in millions)	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Pre-modification Interest Rate		Post-modification Interest Rate		Net Charge-offs
U.S. credit card	$	396	$	400	17.59	%	6.36	%	$	45
Non-U.S. credit card	196		206		26.19		1.15		190
Direct/Indirect consumer	160		113		9.59		5.72		52
Total	$	752	$	719	18.79		4.77		$	287

	December 31, 2011								2011
U.S. credit card	$	890	$	902	19.04	%	6.16	%	$	106
Non-U.S. credit card	305		322		26.32		1.04		291
Direct/Indirect consumer	198		199		15.63		5.22		23
Total	$	1,393	$	1,423	20.20		4.87		$	420


⁽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 2012 and 2011.




Credit Card and Other Consumer – Renegotiated TDRs by Program Type

	Renegotiated TDRs Entered into During 2012
	December 31, 2012
(Dollars in millions)	Internal Programs		External Programs		Other		Total
U.S. credit card	$	248	$	152	$	—	$	400
Non-U.S. credit card	112		94		—		206
Direct/Indirect consumer	36		19		58		113
Total renegotiated TDR loans	$	396	$	265	$	58	$	719

	Renegotiated TDRs Entered into During 2011
	December 31, 2011
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. At December 31, 2012, the allowance for loan and lease losses on the Corporation’s renegotiated portfolio was 29.04 percent of the carrying value of these loans. Loans that entered into payment default during 2012 and 2011 that had been modified in a TDR during the 12 months preceding payment default were $203 million and $863 million for U.S. credit card, $298 million and $409 million for non-U.S. credit card and $35 million 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 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. For information concerning modifications for the U.S. small business commercial portfolio, see Credit Card and Other Consumer in this Note.

At December 31, 2012 and 2011, remaining commitments to lend additional funds to debtors whose terms have been modified in a commercial loan TDR were immaterial. Commercial foreclosed properties totaled $250 million and $612 million at December 31, 2012 and 2011.

The table below presents impaired loans in the Corporation’s Commercial loan portfolio segment at and for the years ended December 31, 2012 and 2011. 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, 2012						2012
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Related Allowance		Average Carrying Value		Interest Income Recognized ⁽¹⁾
With no recorded allowance
U.S. commercial	$	1,220	$	1,109	n/a		$	1,089	$	32
Commercial real estate	1,003		902		n/a		1,496		16
Non-U.S. commercial	240		120		n/a		129		2
With an allowance recorded
U.S. commercial	1,782		1,138		$	68	1,603		32
Commercial real estate	2,287		1,262		147		1,749		16
Non-U.S. commercial	280		33		18		52		2
U.S. small business commercial ⁽²⁾	361		317		97		409		13
Total
U.S. commercial	$	3,002	$	2,247	$	68	$	2,692	$	64
Commercial real estate	3,290		2,164		147		3,245		32
Non-U.S. commercial	520		153		18		181		4
U.S. small business commercial ⁽²⁾	361		317		97		409		13

	December 31, 2011						2011
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		—
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


⁽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 principal is considered collectible.


⁽²⁾	Includes U.S. small business commercial renegotiated TDR loans and related allowance.

n/a = not applicable

The table below presents the December 31, 2012 and 2011 unpaid principal balance and carrying value of commercial loans that were modified as TDRs during 2012 and 2011, and net charge-offs that were recorded during the period in which the modification occurred.




Commercial – TDRs Entered into During 2012 and 2011


	December 31, 2012				2012
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Net Charge-offs
U.S. commercial	$	590	$	558	$	34
Commercial real estate	793		721		20
Non-U.S. commercial	90		89		1
U.S. small business commercial ⁽¹⁾	22		22		5
Total	$	1,495	$	1,390	$	60

	December 31, 2011				2011
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 ⁽¹⁾	58		59		10
Total	$	3,087	$	2,647	$	236


⁽¹⁾	U.S. small business commercial TDRs are comprised of renegotiated small business card loans.

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, 2012 and 2011 had a carrying value of $130 million and $164 million for U.S. commercial, $455 million and $446 million for commercial real estate and $18 million and $68 million for U.S. small business commercial.

Purchased Credit-impaired Loans

The table below shows activity for the accretable yield on Countrywide consumer PCI loans. Reclassifications from nonaccretable difference primarily result when there is a change in expected cash flows due to various factors, including changes in interest rates on variable-rate loans and prepayment assumptions. Changes in the prepayment assumption affect the expected remaining life of the portfolio which results in a change to the amount of future interest cash flows.




Rollforward of Accretable Yield

(Dollars in millions)
Accretable yield, January 1, 2011	$	5,481
Accretion	(1,285		)
Disposals/transfers	(118		)
Reclassifications from nonaccretable difference	912
Accretable yield, December 31, 2011	4,990
Accretion	(1,034		)
Disposals/transfers	(109		)
Reclassifications from nonaccretable difference	797
Accretable yield, December 31, 2012	$	4,644

See Note 1 – Summary of Significant Accounting Principles for further information on PCI loans and Note 6 – Allowance for Credit Losses for the carrying value and valuation allowance for Countrywide PCI loans.

Loans Held-for-sale

The Corporation had LHFS of $19.4 billion and $13.8 billion at December 31, 2012 and 2011. Proceeds from sales, securitizations and paydowns of LHFS were $55.9 billion, $147.5 billion and $281.7 billion for 2012, 2011 and 2010, respectively. Amounts used for originations and purchases of LHFS were $59.8 billion, $118.2 billion and $263.0 billion for 2012, 2011 and 2010, respectively.

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

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Reference 3: http://www.xbrl.org/2003/role/presentationRef

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Reference 8: http://www.xbrl.org/2003/role/presentationRef

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+ Details