Bank of America 2013 Annual Report Download - page 191

Bank of America 2013 189
The table below presents the carrying value of loans that
entered into payment default during 2013, 2012 and 2011 that
were modified in a TDR during the 12 months preceding payment
default. Included in the table are loans with a carrying value of
$2.4 billion, $667 million and $514 million that entered payment
default during 2013, 2012 and 2011 but were no longer held by
the Corporation as of December 31, 2013, 2012 and 2011 due
to sales and other dispositions. 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 a trial modification where the borrower has
not yet met the terms of the agreement are included in the table
below if the borrower is 90 days or more past due three months
after the offer to modify is made.
Home Loans – TDRs Entering Payment Default That Were Modified During the Preceding 12 Months
2013
(Dollars in millions)
Residential
Mortgage
Home
Equity
Total Carrying
Value (1)
Modifications under government programs $454 $ 2 $ 456
Modifications under proprietary programs 1,117 4 1,121
Loans discharged in Chapter 7 bankruptcy (2) 964 30 994
Trial modifications 4,376 14 4,390
Total modifications $ 6,911 $ 50 $ 6,961
2012
Modifications under government programs $ 202 $ 8 $ 210
Modifications under proprietary programs 942 14 956
Loans discharged in Chapter 7 bankruptcy (2) 1,228 53 1,281
Trial modifications 2,351 20 2,371
Total modifications $ 4,723 $ 95 $ 4,818
2011
Modifications under government programs $ 352 $ 2 $ 354
Modifications under proprietary programs 2,098 42 2,140
Trial modifications 1,101 17 1,118
Total modifications $ 3,551 $ 61 $ 3,612
(1) Total carrying value includes loans with a carrying value of $2.4 billion, $667 million and $514 million that entered into payment default during 2013, 2012 and 2011 but were no longer held by the
Corporation as of December 31, 2013, 2012 and 2011 due to sales and other dispositions.
(2) Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.
Credit Card and Other Consumer
Impaired loans within the Credit Card and Other Consumer portfolio
segment consist entirely of loans that have been modified in TDRs
(the renegotiated credit card and other consumer TDR portfolio,
collectively referred to as the renegotiated TDR portfolio). The
Corporation seeks to assist customers that are experiencing
financial difficulty by modifying loans while ensuring compliance
with federal laws and guidelines. Credit card and other consumer
loan modifications generally 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
addition, non-U.S. credit card modifications may involve reducing
the interest rate on the account without placing the customer on
a fixed payment plan, and are also 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).
The Corporation classifies other secured consumer loans that have
been discharged in Chapter 7 bankruptcy as TDRs which are written
down to collateral value and placed on nonaccrual status no later
than the time of discharge. For more information on the regulatory
guidance on loans discharged in Chapter 7 bankruptcy, see
Nonperforming Loans and Leases in this Note.
All credit card and substantially all other consumer loans that
have been modified in TDRs remain on accrual status until the
loan is either paid in full or charged off, which occurs no later than
the end of the month in which the loan becomes 180 days past
due or generally at 120 days past due for a loan that was placed
on a fixed payment plan after July 1, 2012.
The allowance for impaired credit card and substantially all
other consumer loans is based on the present value of projected
cash flows, which incorporates the Corporation’s historical
payment default and loss experience on modified loans,
discounted using the portfolio’s average contractual interest rate,
excluding promotionally priced loans, in effect prior to
restructuring. 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, delinquency status, economic trends
and credit scores.