Wells Fargo 2013 Annual Report Download - page 64

Risk Management – Credit Risk Management (continued)
We continue to modify real estate 1-4 family mortgage loans
to assist homeowners and other borrowers experiencing
financial difficulties. Loans are underwritten at the time of the
modification in accordance with underwriting guidelines
established for governmental and proprietary loan modification
programs. As a participant in the U.S. Treasury’s Making Home
Affordable (MHA) programs, we are focused on helping
customers stay in their homes. The MHA programs create a
standardization of modification terms including incentives paid
to borrowers, servicers, and investors. MHA includes the Home
Affordable Modification Program (HAMP) for first lien loans and
the Second Lien Modification Program (2MP) for junior lien
loans. Under both our proprietary programs and the MHA
programs, we may provide concessions such as interest rate
reductions, forbearance of principal, and in some cases,
principal forgiveness. These programs generally include trial
payment periods of three to four months, and after successful
completion and compliance with terms during this period, the
loan is permanently modified. Once the loan enters a trial period
or permanent modification, it is accounted for as a TDR. See the
“Critical Accounting Policies – Allowance for Credit Losses”
section in this Report for discussion on how we determine the
allowance attributable to our modified residential real estate
portfolios.
Real estate 1-4 family first and junior lien mortgage loans by
state are presented in Table 23. Our real estate 1-4 family
mortgage loans to borrowers in California represented
approximately 13% of total loans at December 31, 2013, located
mostly within the larger metropolitan areas, with no single
California metropolitan area consisting of more than 3% of total
loans. We monitor changes in real estate values and underlying
economic or market conditions for all geographic areas of our
real estate 1-4 family mortgage portfolio as part of our credit risk
management process.
We monitor the credit performance of our junior lien
mortgage portfolio for trends and factors that influence the
frequency and severity of loss. In 2012, we aligned our
nonaccrual reporting with Interagency Guidance issued by bank
regulators so that a junior lien is reported as a nonaccrual loan if
the related first lien is 120 days past due or is in the process of
foreclosure, regardless of delinquency status. Additionally, in
third quarter 2012, we aligned our nonaccrual and troubled debt
reclassification policies in accordance with guidance in the Office
of the Comptroller of the Currency (OCC) update to the Bank
Accounting Advisory Series (OCC Guidance), which requires
consumer loans discharged in bankruptcy to be written down to
net realizable collateral value and classified as nonaccrual TDRs,
regardless of their delinquency status.
Table 23: Real Estate 1-4 Family First and Junior Lien
Mortgage Loans by State
December 31, 2013
(in millions)
Real estate
1-4 family
first
mortgage
Real estate
1-4 family
junior lien
mortgage
Total real
estate 1-4
family
mortgage
% of
total
loans
PCI loans:
California $ 16,228 31 16,259 2 %
Florida 1,884 21 1,905 *
New Jersey 1,007 16 1,023 *
Other (1) 4,981 55 5,036 1
Total PCI loans $ 24,100 123 24,223 3 %
All other loans:
California $ 71,422 18,325 89,747 11 %
Florida 14,872 5,943 20,815 2
New York 14,338 2,877 17,215 2
New Jersey 10,122 5,107 15,229 2
Virginia 6,850 3,532 10,382 1
Pennsylvania 5,925 3,160 9,085 1
North Carolina 5,978 2,848 8,826 1
Texas 7,770 944 8,714 1
Georgia 4,830 2,618 7,448 1
Other (2) 61,553 20,437 81,990 10
Government insured/
guaranteed loans (3) 30,737 - 30,737 4
Total all other loans $ 234,397 65,791 300,188 36 %
Total $ 258,497 65,914 324,411 39 %
* Less than 1%.
(1) Consists of 45 states; no state had loans in excess of $614 million.
(2) Consists of 41 states; no state had loans in excess of $7.1 billion.
(3) Represents loans whose repayments are predominantly insured by the Federal
Housing Administration (FHA) or guaranteed by the Department of Veterans
Affairs (VA).
Part of our credit monitoring includes tracking delinquency,
FICO scores and collateral values (LTV/CLTV) on the entire real
estate 1-4 family mortgage loan portfolio. These credit risk
indicators, which exclude government insured/guaranteed loans,
continued to improve in fourth quarter 2013 on the non-PCI
mortgage portfolio. Loans 30 days or more delinquent at
December 31, 2013, totaled $11.9 billion, or 4%, of total non-PCI
mortgages, compared with $15.5 billion, or 5%, at
December 31, 2012. Loans with FICO scores lower than 640
totaled $31.5 billion at December 31, 2013, or 10% of total non-
PCI mortgages, compared with $37.7 billion, or 13%, at
December 31, 2012. Mortgages with a LTV/CLTV greater than
100% totaled $34.3 billion at December 31, 2013, or 11% of total
non-PCI mortgages, compared with $58.7 billion, or 20%, at
December 31, 2012. Information regarding credit risk indicators
can be found in Note 6 (Loans and Allowance for Credit Losses)
to Financial Statements in this Report.
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