Bank of America 2015 Annual Report Download - page 66

64 Bank of America 2015
Consumer Portfolio Credit Risk Management
Credit risk management for the consumer portfolio begins with
initial underwriting and continues throughout a borrower’s credit
cycle. Statistical techniques in conjunction with experiential
judgment are used in all aspects of portfolio management
including underwriting, product pricing, risk appetite, setting credit
limits, and establishing operating processes and metrics to
quantify and balance risks and returns. Statistical models are built
using detailed behavioral information from external sources such
as credit bureaus and/or internal historical experience. These
models are a component of our consumer credit risk management
process and are used in part to assist in making both new and
ongoing credit decisions, as well as portfolio management
strategies, including authorizations and line management,
collection practices and strategies, and determination of the
allowance for loan and lease losses and allocated capital for credit
risk.
During 2015, we completed approximately 51,300 customer
loan modifications with a total unpaid principal balance of $8.4
billion, including approximately 21,200 permanent modifications,
under the U.S. government’s Making Home Affordable Program.
Of the loan modifications completed in 2015, in terms of both the
volume of modifications and the unpaid principal balance
associated with the underlying loans, more than half were in the
Corporation’s held-for-investment (HFI) portfolio. For modified
loans on our balance sheet, these modification types are generally
considered troubled debt restructurings (TDR). For more
information on TDRs and portfolio impacts, see Consumer Portfolio
Credit Risk Management – Nonperforming Consumer Loans,
Leases and Foreclosed Properties Activity on page 73 and Note 4
– Outstanding Loans and Leases to the Consolidated Financial
Statements.
Consumer Credit Portfolio
Improvement in the U.S. unemployment rate and home prices
continued during 2015 resulting in improved credit quality and
lower credit losses across most major consumer portfolios
compared to 2014. Nearly all consumer loan portfolios 30 and 90
days or more past due declined during 2015 as a result of improved
delinquency trends.
Improved credit quality, continued loan balance run-off and
sales across the consumer portfolio drove a $2.6 billion decrease
in the consumer allowance for loan and lease losses in 2015 to
$7.4 billion at December 31, 2015. For additional information,
see Allowance for Credit Losses on page 86.
For more information on our accounting policies regarding
delinquencies, nonperforming status, charge-offs and TDRs for the
consumer portfolio, see Note 1 – Summary of Significant
Accounting Principles to the Consolidated Financial Statements.
For more information on representations and warranties related
to our residential mortgage and home equity portfolios, see Off-
Balance Sheet Arrangements and Contractual Obligations –
Representations and Warranties on page 44 and Note 7 –
Representations and Warranties Obligations and Corporate
Guarantees to the Consolidated Financial Statements.
Table 22 presents our outstanding consumer loans and leases,
and the PCI loan portfolio. In addition to being included in the
“Outstandings” columns in Table 22, PCI loans are also shown
separately in the “Purchased Credit-impaired Loan Portfolio”
columns. The impact of the PCI loan portfolio on certain credit
statistics is reported where appropriate. For more information on
PCI loans, see Consumer Portfolio Credit Risk Management –
Purchased Credit-impaired Loan Portfolio on page 71 and Note 4
– Outstanding Loans and Leases to the Consolidated Financial
Statements.
Table 22 Consumer Loans and Leases
December 31
Outstandings
Purchased Credit-impaired
Loan Portfolio
(Dollars in millions) 2015 2014 2015 2014
Residential mortgage (1) $ 187,911 $216,197 $12,066 $ 15,152
Home equity 75,948 85,725 4,619 5,617
U.S. credit card 89,602 91,879 n/a n/a
Non-U.S. credit card 9,975 10,465 n/a n/a
Direct/Indirect consumer (2) 88,795 80,381 n/a n/a
Other consumer (3) 2,067 1,846 n/a n/a
Consumer loans excluding loans accounted for under the fair value option 454,298 486,493 16,685 20,769
Loans accounted for under the fair value option (4) 1,871 2,077 n/a n/a
Total consumer loans and leases $ 456,169 $488,570 $16,685 $ 20,769
(1) Outstandings include pay option loans of $2.3 billion and $3.2 billion at December 31, 2015 and 2014. We no longer originate pay option loans.
(2) Outstandings include auto and specialty lending loans of $42.6 billion and $37.7 billion, unsecured consumer lending loans of $886 million and $1.5 billion, U.S. securities-based lending loans of
$39.8 billion and $35.8 billion, non-U.S. consumer loans of $3.9 billion and $4.0 billion, student loans of $564 million and $632 million and other consumer loans of $1.0 billion and $761 million
at December 31, 2015 and 2014.
(3) Outstandings include consumer finance loans of $564 million and $676 million, consumer leases of $1.4 billion and $1.0 billion and consumer overdrafts of $146 million and $162 million at
December 31, 2015 and 2014.
(4) Consumer loans accounted for under the fair value option include residential mortgage loans of $1.6 billion and $1.9 billion and home equity loans of $250 million and $196 million at December
31, 2015 and 2014. For more information on the fair value option, see Note 21 – Fair Value Option to the Consolidated Financial Statements.
n/a = not applicable