Bank of America Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Outstanding Loans and Leases

Outstanding Loans and Leases

6 Months Ended

Jun. 30, 2012

Loans and Leases Receivable Disclosure [Abstract]

NOTE 5 – Outstanding Loans and Leases

The following tables present total outstanding loans and leases and an aging analysis at June 30, 2012 and December 31, 2011.



	June 30, 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⁾	$	2,072		$	726		$	4,099		$	6,897		$	166,819								$	173,716
Home equity	290			154			521			965			63,141									64,106
Legacy Assets & Servicing portfolio
Residential mortgage	2,813			1,618			30,315			34,746			34,570			$	9,603					78,919
Home equity	674			422			1,662			2,758			39,508			11,639						53,905
Discontinued real estate ⁽⁶⁾	51			20			303			374			736			8,949						10,059
Credit card and other consumer
U.S. credit card	760			594			1,594			2,948			91,343									94,291
Non-U.S. credit card	116			96			253			465			12,966									13,431
Direct/Indirect consumer ⁽⁷⁾	568			255			655			1,478			81,686									83,164
Other consumer ⁽⁸⁾	44			17			3			64			2,504									2,568
Total consumer loans	7,388			3,902			39,405			50,695			493,273			30,191						574,159
Consumer loans accounted for under the fair value option ⁽⁹⁾																			$	1,172		1,172
Total consumer	7,388			3,902			39,405			50,695			493,273			30,191			1,172			575,331
Commercial
U.S. commercial	197			153			800			1,150			183,774									184,924
Commercial real estate ⁽¹⁰⁾	138			119			1,345			1,602			34,933									36,535
Commercial lease financing	23			22			33			78			21,614									21,692
Non-U.S. commercial	—			—			—			—			53,850									53,850
U.S. small business commercial	138			111			244			493			12,301									12,794
Total commercial loans	496			405			2,422			3,323			306,472									309,795
Commercial loans accounted for under the fair value option ⁽⁹⁾																			7,189			7,189
Total commercial	496			405			2,422			3,323			306,472						7,189			316,984
Total loans and leases	$	7,884		$	4,307		$	41,827		$	54,018		$	799,745		$	30,191		$	8,361		$	892,315
Percentage of outstandings	0.88		%	0.48		%	4.69		%	6.05		%	89.63		%	3.38		%	0.94		%


⁽¹⁾	Home loans 30-59 days past due includes $2.0 billion of fully-insured loans and $543 million of nonperforming loans. Home loans 60-89 days past due includes $1.1 billion of fully-insured loans and $511 million of nonperforming loans.


⁽²⁾	Home loans includes $22.3 billion of fully-insured loans.


⁽³⁾	Home loans includes $3.8 billion of nonperforming loans as all principal and interest are not current or the loans are TDRs that have not demonstrated sustained repayment performance.


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


⁽⁵⁾	Total outstandings includes non-U.S. residential mortgages of $92 million.


⁽⁶⁾	Total outstandings includes $9.0 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 $36.7 billion, consumer lending loans of $6.3 billion, U.S. securities-based lending margin loans of $25.7 billion, student loans of $5.4 billion, non-U.S. consumer loans of $7.8 billion and other consumer loans of $1.3 billion.


⁽⁸⁾	Total outstandings includes consumer finance loans of $1.5 billion, other non-U.S. consumer loans of $908 million and consumer overdrafts of $127 million.

⁽⁹⁾

Consumer loans accounted for under the fair value option were residential mortgage loans of $172 million and discontinued real estate loans of $1.0 billion. Commercial loans accounted for under the fair value option were U.S. commercial loans of $1.9 billion and non-U.S. commercial loans of $5.3 billion. For addition information, see Note 15 – Fair Value Measurements and Note 16 – Fair Value Option.


⁽¹⁰⁾	Total outstandings includes U.S. commercial real estate loans of $35.0 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	1.01		%	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 of nonperforming loans as all principal and interest are not current or the loans are TDRs that have not demonstrated sustained repayment performance.


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


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


⁽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 15 – Fair Value Measurements and Note 16 – 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 mortgages owned by the Corporation. Cash held in the vehicles is used to reimburse the Corporation in the event that losses on the mortgage portfolio exceed 10 basis points (bps) of the original pool balance, up to the remaining amount of purchased loss protection of $633 million and $783 million at June 30, 2012 and December 31, 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 June 30, 2012 and December 31, 2011, the Corporation had a receivable of $344 million and $359 million from these vehicles for reimbursement of losses, and principal of $20.6 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 $26.4 billion and $24.4 billion at June 30, 2012 and December 31, 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

During the first quarter of 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, the Corporation reclassified $1.9 billion of performing home equity loans to nonperforming as of March 31, 2012, and $1.8 billion was included in nonperforming loans at June 30, 2012. The regulatory interagency guidance had no impact on the Corporation's allowance for loan and lease losses or provision expense as the delinquency status of the underlying first-lien loans was already considered in the Corporation's reserving process.

The table below presents the Corporation’s nonperforming loans and leases including nonperforming troubled debt restructurings (TDRs) and loans accruing past due 90 days or more at June 30, 2012 and December 31, 2011. Nonperforming loans held-for-sale (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 to the Consolidated Financial Statements of the Corporation's 2011 Annual Report on Form 10-K for further information on the criteria for classification as nonperforming.



Credit Quality
	Nonperforming Loans and Leases ⁽¹⁾				Accruing Past Due 90 Days or More
(Dollars in millions)	June 30 2012		December 31 2011		June 30 2012		December 31 2011
Home loans
Core portfolio
Residential mortgage ⁽²⁾	$	2,767	$	2,414	$	1,793	$	883
Home equity	1,063		439		—		—
Legacy Assets & Servicing portfolio
Residential mortgage ⁽²⁾	11,854		13,556		20,494		20,281
Home equity	3,144		2,014		—		—
Discontinued real estate	257		290		—		—
Credit card and other consumer
U.S. credit card	n/a		n/a		1,594		2,070
Non-U.S. credit card	n/a		n/a		253		342
Direct/Indirect consumer	35		40		627		746
Other consumer	1		15		2		2
Total consumer	19,121		18,768		24,763		24,324
Commercial
U.S. commercial	1,841		2,174		33		75
Commercial real estate	2,498		3,880		20		7
Commercial lease financing	39		26		16		14
Non-U.S. commercial	194		143		—		—
U.S. small business commercial	143		114		167		216
Total commercial	4,715		6,337		236		312
Total consumer and commercial	$	23,836	$	25,105	$	24,999	$	24,636


⁽¹⁾	Nonperforming loan balances do not include nonaccruing TDRs removed from the PCI portfolio prior to January 1, 2010 of $461 million and $477 million at June 30, 2012 and December 31, 2011.

⁽²⁾

Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At June 30, 2012 and December 31, 2011, residential mortgage includes $18.1 billion and $17.0 billion of loans on which interest has been curtailed by the Federal Housing Administration, and therefore are no longer accruing interest, although principal is still insured, and $4.2 billion of loans on which interest is still accruing for both periods.

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 to the Consolidated Financial Statements of the Corporation's 2011 Annual Report on Form 10-K. 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 combined loan-to-value (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 scores measure 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. The Corporation’s commercial loans are evaluated using the internal classifications of pass rated or reservable criticized as the primary credit quality indicators. The term reservable criticized refers to those commercial loans that are internally classified or listed by the Corporation as Special Mention, Substandard or Doubtful, which are asset categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not considered reservable criticized. In addition to these primary credit quality indicators, the Corporation uses other credit quality indicators for certain types of loans.

The following tables present certain credit quality indicators for the Corporation’s Home Loans, Credit Card and Other Consumer, and Commercial portfolio segments, by class of financing receivables, at June 30, 2012 and December 31, 2011.



Home Loans - Credit Quality Indicators ⁽¹⁾
	June 30, 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	$	77,521	$	18,372	$	3,518	$	42,395	$	14,992	$	2,561	$	805	$	5,245
Greater than 90 percent but less than 100 percent	10,544		5,199		1,406		6,948		4,367		1,086		104		1,089
Greater than 100 percent	16,420		21,266		4,679		14,763		22,907		7,992		201		2,615
Fully-insured loans ⁽⁴⁾	69,231		24,479		—		—		—		—		—		—
Total home loans	$	173,716	$	69,316	$	9,603	$	64,106	$	42,266	$	11,639	$	1,110	$	8,949

Refreshed FICO score
Less than 620	$	6,933	$	14,983	$	3,401	$	2,789	$	6,376	$	1,584	$	472	$	5,153
Greater than or equal to 620 and less than 680	8,694		6,403		1,406		4,608		6,342		1,858		165		1,316
Greater than or equal to 680 and less than 740	24,916		8,872		2,112		13,061		11,009		3,426		221		1,312
Greater than or equal to 740	63,942		14,579		2,684		43,648		18,539		4,771		252		1,168
Fully-insured loans ⁽⁴⁾	69,231		24,479		—		—		—		—		—		—
Total home loans	$	173,716	$	69,316	$	9,603	$	64,106	$	42,266	$	11,639	$	1,110	$	8,949


⁽¹⁾	Excludes $1.2 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.



Credit Card and Other Consumer - Credit Quality Indicators
	June 30, 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	$	6,463	$	—	$	2,442	$	734
Greater than or equal to 620 and less than 680	14,036		—		3,863		324
Greater than or equal to 680 and less than 740	37,032		—		10,424		246
Greater than or equal to 740	36,760		—		25,584		230
Other internal credit metrics ^{(2, 3, 4)}	—		13,431		40,851		1,034
Total credit card and other consumer	$	94,291	$	13,431	$	83,164	$	2,568


⁽¹⁾	95 percent of the other consumer portfolio was associated with portfolios from certain consumer finance businesses that the Corporation previously exited.


⁽²⁾	Other internal credit metrics include delinquency status, geography or other factors.


⁽³⁾	Direct/indirect consumer includes $33.4 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $5.4 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 June 30, 2012, 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⁾
	June 30, 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	$	176,221	$	30,065	$	20,552	$	52,432	$	2,096
Reservable criticized	8,703		6,470		1,140		1,418		621
Refreshed FICO score ⁽³⁾
Less than 620									456
Greater than or equal to 620 and less than 680									595
Greater than or equal to 680 and less than 740									1,599
Greater than or equal to 740									2,525
Other internal credit metrics ^{(3, 4)}									4,902
Total commercial credit	$	184,924	$	36,535	$	21,692	$	53,850	$	12,794


⁽¹⁾	Excludes $7.2 billion of loans accounted for under the fair value option.


⁽²⁾	U.S. small business commercial includes $411 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 June 30, 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 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 Home 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	$	3,749	$	2,843	$	7,293	$	2,547	$	548	$	5,968
Greater than or equal to 620 and less than 680	9,331		6,537		1,396		4,704		6,866		2,163		175		1,318
Greater than or equal to 680 and less than 740	26,569		9,439		2,109		13,561		11,798		3,155		228		1,360
Greater than or equal to 740	66,623		15,614		2,712		45,947		19,709		4,113		287		1,211
Fully-insured loans ⁽⁴⁾	68,794		25,060		—		—		—		—		—		—
Total home loans	$	178,337	$	73,987	$	9,966	$	67,055	$	45,666	$	11,978	$	1,238	$	9,857


⁽¹⁾	Excludes $2.2 billion of loans accounted for under the fair value option.


⁽²⁾	Excludes Countrywide PCI loans.


⁽³⁾	Refreshed LTV percentages for PCI loans are calculated using the carrying value gross of the related valuation allowance.


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


⁽⁵⁾	During the first quarter of 2012, refreshed home equity FICO metrics reflected an updated scoring model. Prior periods 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 was associated with portfolios from certain consumer finance businesses that the Corporation previously exited.


⁽²⁾	Other internal credit metrics 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 credit	$	179,948	$	39,596	$	21,989	$	55,418	$	13,251


⁽¹⁾	Excludes $6.6 billion of loans accounted for under the fair value option.


⁽²⁾	U.S. small business commercial includes $491 million of criticized business card and small business loans which are evaluated using 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 include delinquency status, application scores, geography or other factors.

Impaired Loans and Troubled Debt Restructurings

A loan is considered impaired when, based on current information, it is probable that the Corporation will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans, all TDRs, and the renegotiated credit card and other consumer TDR portfolio (the renegotiated credit card and other consumer TDR portfolio, collectively referred to as the renegotiated TDR portfolio). Loans whose contractual terms have been modified in a TDR are typically placed on nonaccrual status and reported as nonperforming until the loans have performed for an adequate period of time under the restructured agreement, generally six months. However, if a borrower demonstrates performance under the previous terms and the underwriting process shows capacity to continue to perform under the modified terms, a loan may remain on accrual status. A loan modified in a TDR that is on accrual status may also be removed from TDR status if it bore a market rate of interest at the time of modification. 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. Purchased credit-impaired (PCI) loans are excluded and reported separately on page 179.

Home Loans

Impaired home loans within the Home Loans portfolio segment consist entirely of TDRs. Excluding PCI loans, substantially all modifications of home loans meet the definition of TDRs 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 the second quarter of 2012, the Corporation implemented a borrower assistance program that provides forgiveness of principal balances in connection with the global settlement agreement among the Corporation and certain of its affiliates and subsidiaries, together with the U.S. Department of Justice, 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 (Global Settlement Agreement).

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. 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 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) are measured based on the estimated fair value of the collateral and a charge-off is recorded if the carrying value exceeds the fair value of the collateral. Home loans that reached 180 days past due prior to modification would have been charged off to their net realizable value before they were modified as TDRs in accordance with established policy. Therefore, modifications of home loans that are 180 or more days 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 June 30, 2012 and December 31, 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 $1.1 billion and $2.0 billion at June 30, 2012 and December 31, 2011.

The table below presents impaired loans in the Corporation’s Home Loans portfolio segment at June 30, 2012 and December 31, 2011, and for the three and six months ended June 30, 2012 and 2011 and includes primarily loans managed by Legacy Assets & Servicing within Consumer Real Estate Services (CRES). 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
					June 30, 2012						December 31, 2011
(Dollars in millions)					Unpaid Principal Balance		Carrying Value		Related Allowance		Unpaid Principal Balance		Carrying Value		Related Allowance
With no recorded allowance
Residential mortgage					$	11,926	$	8,865	n/a		$	10,907	$	8,168	n/a
Home equity					1,780		486		n/a		1,747		479		n/a
Discontinued real estate					408		223		n/a		421		240		n/a
With an allowance recorded
Residential mortgage					$	12,750	$	11,451	$	1,309	$	12,296	$	11,119	$	1,295
Home equity					1,437		1,168		553		1,551		1,297		622
Discontinued real estate					195		144		28		213		159		29
Total
Residential mortgage					$	24,676	$	20,316	$	1,309	$	23,203	$	19,287	$	1,295
Home equity					3,217		1,654		553		3,298		1,776		622
Discontinued real estate					603		367		28		634		399		29

	Three Months Ended June 30								Six Months Ended June 30
	2012				2011				2012				2011
	Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾
With no recorded allowance
Residential mortgage	$	8,669	$	74	$	5,427	$	62	$	8,570	$	147	$	5,527	$	116
Home equity	485		10		419		5		496		19		452		10
Discontinued real estate	224		2		216		2		228		4		222		4
With an allowance recorded
Residential mortgage	$	11,326	$	106	$	9,828	$	77	$	11,174	$	204	$	8,790	$	147
Home equity	1,205		13		1,439		8		1,230		22		1,370		15
Discontinued real estate	148		2		181		2		150		4		175		3
Total
Residential mortgage	$	19,995	$	180	$	15,255	$	139	$	19,744	$	351	$	14,317	$	263
Home equity	1,690		23		1,858		13		1,726		41		1,822		25
Discontinued real estate	372		4		397		4		378		8		397		7


⁽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 June 30, 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 the three and six months ended June 30, 2012 and 2011, and net charge-offs that were recorded during the period in which the modification occurred. The following Home Loans 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 within CRES.



Home Loans - TDRs Entered into During the Three Months Ended June 30, 2012 and 2011 ⁽¹⁾
	June 30, 2012								Three Months Ended June 30, 2012
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Pre-Modification Interest Rate		Post-Modification Interest Rate		Net Charge-offs
Residential mortgage	$	1,736	$	1,408	5.68	%	4.78	%	$	72
Home equity	139		82		4.33		3.57		29
Discontinued real estate	26		12		6.88		5.78		4
Total	$	1,901	$	1,502	5.60		4.71		$	105

	June 30, 2011								Three Months Ended June 30, 2011
Residential mortgage	$	4,254	$	3,851	5.97	%	4.99	%	$	51
Home equity	280		169		6.60		4.91		43
Discontinued real estate	39		25		6.49		4.67		2
Total	$	4,573	$	4,045	6.01		4.99		$	96

Home Loans - TDRs Entered into During the Six Months Ended June 30, 2012 and 2011 ⁽¹⁾
	June 30, 2012								Six Months Ended June 30, 2012
Residential mortgage	$	3,299	$	2,755	5.64	%	4.69	%	$	140
Home equity	333		169		4.85		3.60		93
Discontinued real estate	44		21		6.71		5.56		6
Total	$	3,676	$	2,945	5.59		4.61		$	239

	June 30, 2011								Six Months Ended June 30, 2011
Residential mortgage	$	7,823	$	6,954	5.99	%	4.95	%	$	75
Home equity	660		391		6.53		4.71		71
Discontinued real estate	80		50		6.51		4.51		4
Total	$	8,563	$	7,395	6.04		4.93		$	150


⁽¹⁾	TDRs entered into during both the three and six months ended June 30, 2012 include residential mortgage modifications with principal forgiveness of $183 million and discontinued real estate modifications with principal forgiveness of $6 million.

The following table presents the June 30, 2012 and 2011 carrying value for home loans that were modified in a TDR during the three and six months ended June 30, 2012 and 2011 by type of modification.



Home Loans - Modification Programs
	TDRs Entered into During the Three Months Ended June 30, 2012
(Dollars in millions)	Residential Mortgage		Home Equity		Discontinued Real Estate		Total Carrying Value
Modifications under government programs
Contractual interest rate reduction	$	15	$	19	$	—	$	34
Principal and/or interest forbearance	1		7		—		8
Other modifications ⁽¹⁾	2		—		—		2
Total modifications under government programs	18		26		—		44

Modifications under proprietary programs
Contractual interest rate reduction	499		3		1		503
Capitalization of past due amounts	22		—		—		22
Principal and/or interest forbearance	103		2		—		105
Other modifications ⁽¹⁾	27		6		1		34
Total modifications under proprietary programs	651		11		2		664
Trial modifications	739		45		10		794
Total modifications	$	1,408	$	82	$	12	$	1,502

	TDRs Entered into During the Three Months Ended June 30, 2011
Modifications under government programs
Contractual interest rate reduction	$	490	$	45	$	3	$	538
Principal and/or interest forbearance	67		16		—		83
Other modifications ⁽¹⁾	35		2		—		37
Total modifications under government programs	592		63		3		658

Modifications under proprietary programs
Contractual interest rate reduction	1,418		39		5		1,462
Capitalization of past due amounts	234		—		—		234
Principal and/or interest forbearance	243		13		3		259
Other modifications ⁽¹⁾	90		9		—		99
Total modifications under proprietary programs	1,985		61		8		2,054
Trial modifications	1,274		45		14		1,333
Total modifications	$	3,851	$	169	$	25	$	4,045


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



Home Loans - Modification Programs (continued)
	TDRs Entered into During the Six Months Ended June 30, 2012
(Dollars in millions)	Residential Mortgage		Home Equity		Discontinued Real Estate		Total Carrying Value
Modifications under government programs
Contractual interest rate reduction	$	82	$	52	$	—	$	134
Principal and/or interest forbearance	13		17		—		30
Other modifications ⁽¹⁾	19		1		—		20
Total modifications under government programs	114		70		—		184

Modifications under proprietary programs
Contractual interest rate reduction	928		12		1		941
Capitalization of past due amounts	40		—		—		40
Principal and/or interest forbearance	202		6		—		208
Other modifications ⁽¹⁾	76		9		1		86
Total modifications under proprietary programs	1,246		27		2		1,275
Trial modifications	1,395		72		19		1,486
Total modifications	$	2,755	$	169	$	21	$	2,945

	TDRs Entered into During the Six Months Ended June 30, 2011
Modifications under government programs
Contractual interest rate reduction	$	736	$	160	$	7	$	903
Principal and/or interest forbearance	112		28		1		141
Other modifications ⁽¹⁾	59		4		—		63
Total modifications under government programs	907		192		8		1,107

Modifications under proprietary programs
Contractual interest rate reduction	2,767		67		13		2,847
Capitalization of past due amounts	379		—		1		380
Principal and/or interest forbearance	460		29		5		494
Other modifications ⁽¹⁾	211		20		1		232
Total modifications under proprietary programs	3,817		116		20		3,953
Trial modifications	2,230		83		22		2,335
Total modifications	$	6,954	$	391	$	50	$	7,395


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

The table below presents the carrying value of loans that entered into payment default during the three and six months ended June 30, 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 modifications 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
	Three Months Ended June 30, 2012
(Dollars in millions)	Residential Mortgage		Home Equity		Discontinued Real Estate		Total Carrying Value
Modifications under government programs	$	67	$	2	$	1	$	70
Modifications under proprietary programs	241		5		2		248
Trial modifications	181		6		—		187
Total modifications	$	489	$	13	$	3	$	505

	Three Months Ended June 30, 2011
Modifications under government programs	$	46	$	—	$	—	$	46
Modifications under proprietary programs	450		10		3		463
Trial modifications	12		—		1		13
Total modifications	$	508	$	10	$	4	$	522

	Six Months Ended June 30, 2012
Modifications under government programs	$	141	$	4	$	2	$	147
Modifications under proprietary programs	615		9		5		629
Trial modifications	290		9		1		300
Total modifications	$	1,046	$	22	$	8	$	1,076

	Six Months Ended June 30, 2011
Modifications under government programs	$	100	$	—	$	1	$	101
Modifications under proprietary programs	908		30		7		945
Trial modifications	18		1		1		20
Total modifications	$	1,026	$	31	$	9	$	1,066

Credit Card and Other Consumer

The Credit Card and Other Consumer portfolio segment includes impaired loans that have been modified as TDRs. 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).

All credit card and other consumer loans not secured by real estate, including modified loans, remain on accrual status until the loan is either charged off or paid in full. The allowance for impaired credit card loans is based on the present value of projected cash flows, which incorporate 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 June 30, 2012 and December 31, 2011, and for the three and six months ended June 30, 2012 and 2011. The renegotiated TDR portfolio is considered impaired and had a related allowance as shown below.



Impaired Loans - Credit Card and Other Consumer - Renegotiated TDRs
					June 30, 2012						December 31, 2011
(Dollars in millions)					Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance		Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance
With an allowance recorded
U.S. credit card					$	3,883	$	3,905	$	1,068	$	5,272	$	5,305	$	1,570
Non-U.S. credit card					476		483		324		588		597		435
Direct/Indirect consumer					907		911		306		1,193		1,198		405

	Three Months Ended June 30								Six Months Ended June 30
	2012				2011				2012				2011
	Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾
With an allowance recorded
U.S. credit card	$	4,400	$	69	$	7,637	$	115	$	4,710	$	146	$	8,100	$	242
Non-U.S. credit card	508		3		808		1		540		5		803		3
Direct/Indirect consumer	1,000		13		1,686		23		1,073		29		1,763		47


⁽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 June 30, 2012 and December 31, 2011.



Credit Card and Other Consumer - Renegotiated TDRs by Program Type
	Internal Programs				External Programs				Other				Total				Percent of Balances Current or Less Than 30 Days Past Due
(Dollars in millions)	June 30 2012		December 31 2011		June 30 2012		December 31 2011		June 30 2012		December 31 2011		June 30 2012		December 31 2011		June 30 2012		December 31 2011
U.S. credit card	$	2,688	$	3,788	$	1,168	$	1,436	$	49	$	81	$	3,905	$	5,305	80.71	%	78.97	%
Non-U.S. credit card	190		218		87		113		206		266		483		597		54.70		54.02
Direct/Indirect consumer	587		784		311		392		13		22		911		1,198		81.73		80.01
Total renegotiated TDRs	$	3,465	$	4,790	$	1,566	$	1,941	$	268	$	369	$	5,299	$	7,100	78.52		77.05

At June 30, 2012 and December 31, 2011, the Corporation had a renegotiated TDR portfolio of $5.3 billion and $7.1 billion of which $4.2 billion was current or less than 30 days past due under the modified terms at June 30, 2012. The renegotiated TDR portfolio is excluded from nonperforming loans as the Corporation generally does not classify consumer loans not secured by real estate as nonperforming. Instead, these loans are charged off no later than the end of the month in which the loan becomes 180 days past due.

The table below provides information on the Corporation’s renegotiated TDR portfolio including the unpaid principal balance and carrying value of loans that were modified in TDRs during the three and six months ended June 30, 2012 and 2011, along with charge-offs that were recorded during the calendar quarter in which the modification occurred. The table also presents the average pre- and post-modification interest rate.



Credit Card and Other Consumer - Renegotiated TDRs Entered into During the Three Months Ended June 30, 2012 and 2011
	June 30, 2012								Three Months Ended June 30, 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	$	123	$	127	17.61	%	6.30	%	$	1
Non-U.S. credit card	92		97		26.27		0.78		4
Direct/Indirect consumer	18		18		15.24		3.96		—
Total	$	233	$	242	20.91		3.91		$	5

	June 30, 2011								Three Months Ended June 30, 2011
U.S. credit card	$	281	$	291	19.06	%	6.06	%	$	3
Non-U.S. credit card	181		189		26.49		0.66		8
Direct/Indirect consumer	66		67		15.57		5.62		1
Total	$	528	$	547	21.21		4.13		$	12

Credit Card and Other Consumer - Renegotiated TDRs Entered into During the Six Months Ended June 30, 2012 and 2011
	June 30, 2012								Six Months Ended June 30, 2012
U.S. credit card	$	264	$	268	17.94	%	6.34	%	$	8
Non-U.S. credit card	172		181		26.17		0.88		39
Direct/Indirect consumer	41		41		15.37		4.17		1
Total	$	477	$	490	20.75		4.15		$	48

	June 30, 2011								Six Months Ended June 30, 2011
U.S. credit card	$	637	$	652	19.16	%	6.14	%	$	20
Non-U.S. credit card	294		307		26.62		0.68		53
Direct/Indirect consumer	158		161		15.63		5.63		4
Total	$	1,089	$	1,120	20.70		4.57		$	77


⁽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 the three and six months ended June 30, 2012 and 2011.



Credit Card and Other Consumer - Renegotiated TDRs by Program Type
	Renegotiated TDRs Entered into During the Three Months Ended June 30, 2012
(Dollars in millions)	Internal Programs		External Programs		Other		Total
U.S. credit card	$	57	$	70	$	—	$	127
Non-U.S. credit card	51		46		—		97
Direct/Indirect consumer	9		9		—		18
Total renegotiated TDRs	$	117	$	125	$	—	$	242

	Renegotiated TDRs Entered into During the Three Months Ended June 30, 2011
U.S. credit card	$	172	$	117	$	2	$	291
Non-U.S. credit card	99		90		—		189
Direct/Indirect consumer	42		25		—		67
Total renegotiated TDRs	$	313	$	232	$	2	$	547

	Renegotiated TDRs Entered into During the Six Months Ended June 30, 2012
U.S. credit card	$	127	$	141	$	—	$	268
Non-U.S. credit card	95		86		—		181
Direct/Indirect consumer	21		20		—		41
Total renegotiated TDRs	$	243	$	247	$	—	$	490

	Renegotiated TDRs Entered into During the Six Months Ended June 30, 2011
U.S. credit card	$	379	$	271	$	2	$	652
Non-U.S. credit card	150		156		1		307
Direct/Indirect consumer	96		64		1		161
Total renegotiated TDRs	$	625	$	491	$	4	$	1,120

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 June 30, 2012, the allowance for loan and lease losses on the Corporation's renegotiated portfolio was 32.04 percent of the carrying value of these loans. Loans that entered into payment default during the three and six months ended June 30, 2012 that had been modified in a TDR during the 12 months preceding payment default were $51 million and $133 million for U.S. credit card, $77 million and $159 million for non-U.S. credit card and $8 million and $24 million for direct/indirect consumer. Loans that entered into payment default during the three and six months ended June 30, 2011 and that had been modified in a TDR during the 12 months preceding payment default were $217 million and $600 million for U.S. credit card, $101 million and $202 million for non-U.S. credit card and $45 million and $122 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 already have 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 June 30, 2012 and December 31, 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 $433 million and $612 million at June 30, 2012 and December 31, 2011.

The table below presents impaired loans in the Corporation's Commercial loan portfolio segment at June 30, 2012 and December 31, 2011, and for the three and six months ended June 30, 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
					June 30, 2012						December 31, 2011
(Dollars in millions)					Unpaid Principal Balance		Carrying Value		Related Allowance		Unpaid Principal Balance		Carrying Value		Related Allowance
With no recorded allowance
U.S. commercial					$	1,378	$	1,087	n/a		$	1,482	$	985	n/a
Commercial real estate					1,765		1,531		n/a		2,587		2,095		n/a
Non-U.S. commercial					148		148		n/a		216		101		n/a
U.S. small business commercial ⁽¹⁾					—		—		n/a		—		—		n/a
With an allowance recorded
U.S. commercial					$	2,364	$	1,638	$	188	$	2,654	$	1,987	$	232
Commercial real estate					2,350		1,557		106		3,329		2,384		135
Non-U.S. commercial					416		61		12		308		58		6
U.S. small business commercial ⁽¹⁾					449		427		116		531		503		172
Total
U.S. commercial					$	3,742	$	2,725	$	188	$	4,136	$	2,972	$	232
Commercial real estate					4,115		3,088		106		5,916		4,479		135
Non-U.S. commercial					564		209		12		524		159		6
U.S. small business commercial ⁽¹⁾					449		427		116		531		503		172

	Three Months Ended June 30								Six Months Ended June 30
	2012				2011				2012				2011
	Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾
With no recorded allowance
U.S. commercial	$	1,086	$	9	$	534	$	1	$	1,061	$	17	$	503	$	1
Commercial real estate	1,691		4		1,895		1		1,832		8		1,854		2
Non-U.S. commercial	137		—		92		—		125		—		71		—
U.S. small business commercial ⁽¹⁾	—		—		—		—		—		—		—		—
With an allowance recorded
U.S. commercial	$	1,805	$	7	$	2,463	$	2	$	1,854	$	18	$	2,692	$	3
Commercial real estate	1,789		4		3,491		2		2,027		10		3,709		4
Non-U.S. commercial	54		1		66		—		58		1		122		—
U.S. small business commercial ⁽¹⁾	437		3		707		6		455		7		762		13
Total
U.S. commercial	$	2,891	$	16	$	2,997	$	3	$	2,915	$	35	$	3,195	$	4
Commercial real estate	3,480		8		5,386		3		3,859		18		5,563		6
Non-U.S. commercial	191		1		158		—		183		1		193		—
U.S. small business commercial ⁽¹⁾	437		3		707		6		455		7		762		13


⁽¹⁾	Includes U.S. small business commercial renegotiated TDR loans and related allowance.


⁽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.

n/a = not applicable

The table below presents the June 30, 2012 and 2011 unpaid principal balance and carrying value of commercial loans that were modified as TDRs during the three and six months ended June 30, 2012 and 2011, along with charge-offs that were recorded during the calendar quarter in which the modification occurred.



Commercial - TDRs Entered into During the Three Months Ended June 30, 2012 and 2011
	June 30, 2012				Three Months Ended June 30, 2012
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Net Charge-offs
U.S commercial	$	220	$	162	$	13
Commercial real estate	226		210		—
Non-U.S. commercial	66		66		—
U.S. small business commercial ⁽¹⁾	7		8		—
Total	$	519	$	446	$	13

	June 30, 2011				Three Months Ended June 30, 2011
U.S commercial	$	517	$	515	$	1
Commercial real estate	668		589		12
Non-U.S. commercial	45		45		—
U.S. small business commercial ⁽¹⁾	18		21		—
Total	$	1,248	$	1,170	$	13

Commercial - TDRs Entered into During the Six Months Ended June 30, 2012 and 2011
	June 30, 2012				Six Months Ended June 30, 2012
U.S commercial	$	558	$	496	$	15
Commercial real estate	486		401		4
Non-U.S. commercial	66		66		—
U.S. small business commercial ⁽¹⁾	16		17		1
Total	$	1,126	$	980	$	20

	June 30, 2011				Six Months Ended June 30, 2011
U.S commercial	$	892	$	866	$	17
Commercial real estate	1,231		1,071		41
Non-U.S. commercial	52		51		—
U.S. small business commercial ⁽¹⁾	40		46		3
Total	$	2,215	$	2,034	$	61


⁽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 June 30, 2012 and 2011 had a carrying value of $170 million and $27 million for U.S. commercial, $335 million and $268 million for commercial real estate and $12 million and $19 million for U.S. small business commercial.

Purchased Credit-impaired Loans

The table below shows activity for the accretable yield on Countrywide Financial Corporation (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.



(Dollars in millions)	Three Months Ended June 30, 2012			Six Months Ended June 30, 2012
Accretable yield, beginning of period	$	4,872		$	4,990
Accretion	(258		)	(534		)
Disposals/transfers	(1		)	(25		)
Reclassifications from nonaccretable difference	220			402
Accretable yield, June 30, 2012	$	4,833		$	4,833

See Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation's 2011 Annual Report on Form 10-K 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 $13.3 billion and $13.8 billion at June 30, 2012 and December 31, 2011. Proceeds from sales, securitizations and paydowns of LHFS were $23.4 billion and $99.0 billion for the six months ended June 30, 2012 and 2011. Amounts used for originations and purchases of LHFS were $23.5 billion and $80.4 billion for the six months ended June 30, 2012 and 2011.

- Definition

The entire disclosure for claims held for amounts due a company. Examples include trade accounts receivables, notes receivables, loans receivables.

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