Wells Fargo 2012 Annual Report Download - page 164

Note 6: Loans and Allowance for Credit Losses (continued)
The following table summarizes our TDR modifications for
the periods presented by primary modification type and includes
the financial effects of these modifications.
Primary modification type (1) Financial effects of modifications
Weighted Recorded
Other average investment
Interest interest interest related to
rate rate Charge- rate interest rate
(in millions) Principal (2) reduction concessions (3) Total offs (4) reduction reduction (5)
Year ended December 31, 2012
Commercial:
Commercial and industrial $ 11 35 1,370 1,416 40 1.60 % $ 38
Real estate mortgage 47 219 1,907 2,173 12 1.57 226
Real estate construction 12 19 531 562 10 1.69 19
Lease financing - - 4 4 - - -
Foreign - - 19 19 - - -
Total commercial 70 273 3,831 4,174 62 1.58 283
Consumer:
Real estate 1-4 family first mortgage 1,371 1,302 5,822 8,495 547 3.00 2,379
Real estate 1-4 family junior lien mortgage 79 244 756 1,079 512 3.70 313
Credit card - 241 - 241 - 10.85 241
Other revolving credit and installment 5 55 287 347 55 6.82 58
Trial modifications (6) - - 666 666 - - -
Total consumer 1,455 1,842 7,531 10,828 1,114 3.78 2,991
Total $ 1,525 2,115 11,362 15,002 1,176 3.59 % $ 3,274
Year ended December 31, 2011
Commercial:
Commercial and industrial $ 166 64 2,412 2,642 84 3.13 % $ 69
Real estate mortgage 113 146 1,894 2,153 24 1.46 160
Real estate construction 29 114 421 564 26 0.81 125
Lease financing - - 57 57 - - -
Foreign - - 22 22 - - -
Total commercial 308 324 4,806 5,438 134 1.55 354
Consumer:
Real estate 1-4 family first mortgage 1,629 1,908 934 4,471 293 3.27 3,322
Real estate 1-4 family junior lien mortgage 98 559 197 854 28 4.34 654
Credit card - 336 - 336 2 10.77 260
Other revolving credit and installment 74 119 7 200 24 6.36 181
Trial modifications (6) - - 651 651 - - -
Total consumer 1,801 2,922 1,789 6,512 347 4.00 4,417
Total $ 2,109 3,246 6,595 11,950 481 3.82 % $ 4,771
(1) Amounts represent the recorded investment in loans after recognizing the effects of the TDR, if any. TDRs with multiple types of concessions are presented only once in the
table in the first category type based on the order presented.
(2) Principal modifications include principal forgiveness at the time of the modification, contingent principal forgiveness granted over the life of the loan based on borrower
performance, and principal that has been legally separated and deferred to the end of the loan, with a zero percent contractual interest rate.
(3) Other interest rate concessions include loans modified to an interest rate that is not commensurate with the credit risk, even though the rate may have been increased.
These modifications would include renewals, term extensions and other interest adjustments, but exclude modifications that also forgive principal and/or reduce the interest
rate. Year ended December 31, 2012, includes $5.2 billion of consumer loans, consisting of $4.5 billion of first mortgages, $506 million of junior liens and $140 million of
auto and other loans, resulting from the OCC guidance issued in third quarter 2012, which requires consumer loans discharged in bankruptcy to be classified as TDRs, as well
as written down to net realizable collateral value.
(4) Charge-offs include write-downs of the investment in the loan in the period it is contractually modified. The amount of charge-off will differ from the modification terms if the
loan has been charged down prior to the modification based on our policies. In addition, there may be cases where we have a charge-off/down with no legal principal
modification. Modifications resulted in legally forgiving principal (actual, contingent or deferred) of $495 million and $577 million for years ended December 31, 2012 and
2011, respectively. Year ended December 31, 2012, includes $888 million in charge-offs on consumer loans resulting from the OCC guidance discussed above.
(5) Reflects the effect of reduced interest rates to loans with principal or interest rate reduction primary modification type.
(6) Trial modifications are granted a delay in payments due under the original terms during the trial payment period. However, these loans continue to advance through
delinquency status and accrue interest according to their original terms. Any subsequent permanent modification generally includes interest rate related concessions;
however, the exact concession type and resulting financial effect are usually not known until the loan is permanently modified. Trial modifications for the period are
presented net of any trial modifications that successfully complete the program requirements. Such successful modifications are included as an addition to the appropriate
loan category in the period they successfully complete the program requirements.
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