Bank of America 2015 Annual Report Download - page 71

Bank of America 2015 69
production. The HELOC utilization rate was 57 percent and 58
percent at December 31, 2015 and 2014.
Table 28 presents certain home equity portfolio key credit
statistics on both a reported basis excluding loans accounted for
under the fair value option, and excluding the PCI loan portfolio
and loans accounted for under the fair value option. Additionally,
in the “Reported Basis” columns in the table below, accruing
balances past due 30 days or more and nonperforming loans do
not include the PCI loan portfolio, in accordance with our
accounting policies, even though the customer may be
contractually past due. As such, the following discussion presents
the home equity portfolio excluding the PCI loan portfolio and loans
accounted for under the fair value option. For more information on
the PCI loan portfolio, see page 71.
Table 28 Home Equity – Key Credit Statistics
December 31
Reported Basis (1)
Excluding Purchased
Credit-impaired Loans
(Dollars in millions) 2015 2014 2015 2014
Outstandings $ 75,948 $ 85,725 $71,329 $ 80,108
Accruing past due 30 days or more (2) 613 640 613 640
Nonperforming loans (2) 3,337 3,901 3,337 3,901
Percent of portfolio
Refreshed CLTV greater than 90 but less than or equal to 100 6% 8% 6% 7%
Refreshed CLTV greater than 100 12 16 11 14
Refreshed FICO below 620 7877
2006 and 2007 vintages (3) 43 46 41 43
Net charge-off ratio (4) 0.79 1.01 0.84 1.09
(1) Outstandings, accruing past due, nonperforming loans and percentages of the portfolio exclude loans accounted for under the fair value option.
(2) Accruing past due 30 days or more includes $89 million and $98 million and nonperforming loans include $396 million and $505 million of loans where we serviced the underlying first-lien at
December 31, 2015 and 2014.
(3) These vintages of loans have higher refreshed combined LTV ratios and accounted for 45 percent and 47 percent of nonperforming home equity loans at December 31, 2015 and 2014, and 54
percent and 59 percent of net charge-offs in 2015 and 2014.
(4) Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans excluding loans accounted for under the fair value option.
Nonperforming outstanding balances in the home equity
portfolio decreased $564 million in 2015 as outflows, including
sales of $154 million and the transfer of certain qualifying
borrowers discharged in a Chapter 7 bankruptcy to performing
status, outpaced new inflows. Of the nonperforming home equity
portfolio at December 31, 2015, $1.4 billion, or 42 percent, were
current on contractual payments. Nonperforming loans that are
contractually current primarily consist of collateral-dependent
TDRs, including those that have been discharged in Chapter 7
bankruptcy, junior-lien loans where the underlying first-lien is 90
days or more past due, as well as loans that have not yet
demonstrated a sustained period of payment performance
following a TDR. In addition, $1.3 billion, or 38 percent of
nonperforming home equity loans, were 180 days or more past
due and had been written down to the estimated fair value of the
collateral, less costs to sell. Accruing loans that were 30 days or
more past due decreased $27 million in 2015.
In some cases, the junior-lien home equity outstanding balance
that we hold is performing, but the underlying first-lien is not. For
outstanding balances in the home equity portfolio on which we
service the first-lien loan, we are able to track whether the first-
lien loan is in default. For loans where the first-lien is serviced by
a third party, we utilize credit bureau data to estimate the
delinquency status of the first-lien. Given that the credit bureau
database we use does not include a property address for the
mortgages, we are unable to identify with certainty whether a
reported delinquent first-lien mortgage pertains to the same
property for which we hold a junior-lien loan. For certain loans, we
utilize a third-party vendor to combine credit bureau and public
record data to better link a junior-lien loan with the underlying first-
lien mortgage. At December 31, 2015, we estimate that $1.2
billion of current and $157 million of 30 to 89 days past due junior-
lien loans were behind a delinquent first-lien loan. We service the
first-lien loans on $193 million of these combined amounts, with
the remaining $1.1 billion serviced by third parties. Of the $1.3
billion of current to 89 days past due junior-lien loans, based on
available credit bureau data and our own internal servicing data,
we estimate that $484 million had first-lien loans that were
90 days or more past due.
Net charge-offs decreased $271 million to $636 million, or
0.84 percent of the total average home equity portfolio in 2015,
compared to $907 million, or 1.09 percent, in 2014. The decrease
in net charge-offs was primarily driven by favorable portfolio trends
due in part to improvement in home prices and the U.S. economy,
and lower charge-offs related to the consumer relief portion of the
DoJ Settlement, partially offset by lower recoveries.
Outstanding balances in the home equity portfolio with greater
than 90 percent but less than or equal to 100 percent refreshed
combined loan-to-value (CLTV) comprised six percent and seven
percent of the home equity portfolio at December 31, 2015 and
2014. Outstanding balances with refreshed CLTV greater than 100
percent comprised 11 percent and 14 percent of the home equity
portfolio at December 31, 2015 and 2014. Outstanding balances
in the home equity portfolio with a refreshed CLTV greater than
100 percent reflect loans where our loan and available line of
credit combined with any outstanding senior liens against the
property are equal to or greater than the most recent valuation of
the property securing the loan. Depending on the value of the
property, there may be collateral in excess of the first-lien that is
available to reduce the severity of loss on the second-lien. Of those
outstanding balances with a refreshed CLTV greater than
100 percent, 96 percent of the customers were current on their
home equity loan and 92 percent of second-lien loans with a
refreshed CLTV greater than 100 percent were current on both
their second-lien and underlying first-lien loans at December 31,
2015. Outstanding balances in the home equity portfolio to
borrowers with a refreshed FICO score below 620 represented