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, 2012
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 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