Bank of America 2011 Annual Report Download - page 84

82 Bank of America 2011
Table 27 presents outstandings, nonperforming balances and
net charge-offs by certain state concentrations for the home equity
portfolio. In the New York area, the New York-Northern New Jersey-
Long Island MSA made up 11 percent of the outstanding home
equity portfolio at both December 31, 2011 and 2010. This MSA
comprised seven percent and six percent of net charge-offs for
2011 and 2010. The Los Angeles-Long Beach-Santa Ana MSA
within California made up 12 percent and 11 percent of the
outstanding home equity portfolio at December 31, 2011 and
2010. This MSA comprised 12 percent and 11 percent of net
charge-offs for 2011 and 2010.
For information on representations and warranties related to
our home equity portfolio, see Off-Balance Sheet Arrangements
and Contractual Obligations – Representations and Warranties on
page 50 and Note 9 – Representations and Warranties Obligations
and Corporate Guarantees to the Consolidated Financial
Statements.
Table 27
(Dollars in millions)
California
Florida
New Jersey
New York
Massachusetts
Other U.S./Non-U.S.
Home equity loans (1)
Countrywide purchased credit-impaired home equity portfolio
Total home equity loan portfolio
Home Equity State Concentrations
December 31
Outstandings
2011
$ 32,398
13,450
7,483
7,423
4,919
47,048
$ 112,721
11,978
$ 124,699
2010
$ 35,426
15,028
8,153
8,061
5,657
53,066
$125,391
12,590
$137,981
Nonperforming
2011
$627
411
175
242
67
931
$ 2,453
2010
$ 708
482
169
246
71
1,018
$ 2,694
Net Charge-offs
2011
$ 1,481
853
164
196
71
1,708
$ 4,473
2010
$ 2,341
1,420
219
273
102
2,426
$ 6,781
(1) Amount excludes the Countrywide PCI home equity loan portfolio.
Discontinued Real Estate
The discontinued real estate portfolio, excluding $1.3 billion of
loans accounted for under the fair value option, totaled $11.1
billion at December 31, 2011 and consists of pay option and
subprime loans acquired in the Countrywide acquisition. Upon
acquisition, the majority of the discontinued real estate portfolio
was considered credit-impaired and written down to fair value. At
December 31, 2011, the Countrywide PCI loan portfolio was $9.9
billion, or 89 percent of the total discontinued real estate portfolio.
This portfolio is included in All Other and is managed as part of
our overall ALM activities. See Countrywide Purchased Credit-
impaired Loan Portfolio on page 83 for more information on the
discontinued real estate portfolio.
At December 31, 2011, the purchased discontinued real estate
portfolio that was not credit-impaired was $1.2 billion. Loans with
greater than 90 percent refreshed LTVs and CLTVs comprised
28 percent of the portfolio and those with refreshed FICO scores
below 620 represented 44 percent of the portfolio. The Los
Angeles-Long Beach-Santa Ana MSA within California made up 16
percent of outstanding discontinued real estate loans at
December 31, 2011.
Pay option adjustable-rate mortgages (ARMs), which are
included in the discontinued real estate portfolio, have interest
rates that adjust monthly and minimum required payments that
adjust annually, subject to resetting of the loan if minimum
payments are made and deferred interest limits are reached.
Annual payment adjustments are subject to a 7.5 percent
maximum change. To ensure that contractual loan payments are
adequate to repay a loan, the fully-amortizing loan payment amount
is re-established after the initial five- or 10-year period and again
every five years thereafter. These payment adjustments are not
subject to the 7.5 percent limit and may be substantial due to
changes in interest rates and the addition of unpaid interest to
the loan balance. Payment advantage ARMs have interest rates
that are fixed for an initial period of five years. Payments are subject
to reset if the minimum payments are made and deferred interest
limits are reached. If interest deferrals cause a loan’s principal
balance to reach a certain level within the first 10 years of the life
of the loan, the payment is reset to the interest-only payment; then
at the 10-year point, the fully-amortizing payment is required.
The difference between the frequency of changes in a loan’s
interest rates and payments along with a limitation on changes in
the minimum monthly payments of 7.5 percent per year can result
in payments that are not sufficient to pay all of the monthly interest
charges (i.e., negative amortization). Unpaid interest is added to
the loan balance until the loan balance increases to a specified
limit, which can be no more than 115 percent of the original loan
amount, at which time a new monthly payment amount adequate
to repay the loan over its remaining contractual life is established.
At December 31, 2011, the unpaid principal balance of pay
option loans was $11.7 billion, with a carrying amount of
$9.9 billion, including $9.0 billion of loans that were credit-
impaired upon acquisition, and accordingly, are reserved for based
on a life-of-loan loss estimate. The total unpaid principal balance
of pay option loans with accumulated negative amortization was
$9.5 billion including $672 million of negative amortization. For
those borrowers who are making payments in accordance with
their contractual terms, the percentage electing to make only the
minimum payment on option ARMs was 72 percent at
December 31, 2011 and 69 percent at December 31, 2010. We
continue to evaluate our exposure to payment resets on the
acquired negative-amortizing loans including the Countrywide PCI
pay option loan portfolio and have taken into consideration several
assumptions regarding this evaluation including prepayment and
default rates. Of the loans in the pay option portfolio at
December 31, 2011 that have not already experienced a payment
reset, seven percent are expected to reset in 2012 and
approximately 17 percent are expected to reset thereafter. In
addition, approximately seven percent are expected to prepay and
approximately 69 percent are expected to default prior to being
reset, most of which were severely delinquent as of December 31,
2011.