XML 30 R14.htm IDEA: XBRL DOCUMENT v3.3.1.900
Loans Receivable, Net
 12 Months Ended
Dec. 31, 2015
Loans and Leases Receivable Disclosure [Abstract]  
LOANS RECEIVABLE, NET
LOANS RECEIVABLE, NET
Loans receivable, net at December 31, 2015 and 2014 are summarized as follows (dollars in millions): 
 
December 31,
 
2015
 
2014
One- to four-family
$
2,488

 
$
3,060

Home equity
2,114

 
2,834

Consumer and other
341

 
455

Total loans receivable
4,943

 
6,349

Unamortized premiums, net
23

 
34

Allowance for loan losses
(353
)
 
(404
)
Total loans receivable, net
$
4,613

 
$
5,979


At December 31, 2015, the Company pledged $4.2 billion and $0.3 billion of loans as collateral to the FHLB and Federal Reserve Bank, respectively. At December 31, 2014, the Company pledged $5.4 billion and $0.5 billion of loans as collateral to the FHLB and Federal Reserve Bank, respectively.
The following table presents the total recorded investment in loans receivable and allowance for loan losses by loans that have been collectively evaluated for impairment and those that have been individually evaluated for impairment by loan class at December 31, 2015 and 2014 (dollars in millions): 
 
Recorded Investment
 
Allowance for Loan Losses
 
December 31,
 
December 31,
 
2015
 
2014
 
2015
 
2014
Collectively evaluated for impairment:
 
 
 
 
 
 
 
One- to four-family
$
2,219

 
$
2,764

 
$
31

 
$
18

Home equity
1,915

 
2,625

 
255

 
310

Consumer and other
344

 
461

 
6

 
10

Total collectively evaluated for impairment
4,478

 
5,850

 
292

 
338

Individually evaluated for impairment:
 
 
 
 
 
 
 
One- to four-family
286

 
316

 
9

 
9

Home equity
202

 
217

 
52

 
57

Total individually evaluated for impairment
488

 
533

 
61

 
66

Total
$
4,966

 
$
6,383

 
$
353

 
$
404


Credit Quality and Concentrations of Credit Risk
The Company tracks and reviews factors to predict and monitor credit risk in its mortgage loan portfolio on an ongoing basis. These factors include: loan type, estimated current LTV/CLTV ratios, delinquency history, borrowers’ current credit scores, housing prices, loan vintage and geographic location of the property. The Company believes LTV/CLTV ratios and credit scores are the key factors in determining future loan performance. The factors are updated on at least a quarterly basis. The Company tracks and reviews delinquency status to predict and monitor credit risk in the consumer and other loan portfolio on at least a quarterly basis.
Credit Quality
The following tables show the distribution of the Company’s mortgage loan portfolios by credit quality indicator at December 31, 2015 and 2014 (dollars in millions): 
 
One- to Four-Family
 
Home Equity
 
December 31,
 
December 31,
Current LTV/CLTV (1)
2015
 
2014
 
2015
 
2014
<=80%
$
1,519

 
$
1,757

 
$
843

 
$
1,081

80%-100%
609

 
807

 
549

 
755

100%-120%
227

 
311

 
420

 
557

>120%
133

 
185

 
302

 
441

Total mortgage loans receivable
$
2,488

 
$
3,060

 
$
2,114

 
$
2,834

Average estimated current LTV/CLTV (2)
77
%
 
79
%
 
90
%
 
92
%
Average LTV/CLTV at loan origination (3)
71
%
 
71
%
 
81
%
 
80
%
 
(1)
Current CLTV calculations for home equity loans are based on the maximum available line for home equity lines of credit and outstanding principal balance for home equity installment loans. For home equity loans in the second lien position, the original balance of the first lien loan at origination date and updated valuations on the property underlying the loan are used to calculate CLTV. Current property values are updated on a quarterly basis using the most recent property value data available to the Company. For properties in which the Company did not have an updated valuation, home price indices were utilized to estimate the current property value.
(2)
The average estimated current LTV/CLTV ratio reflects the outstanding balance at the balance sheet date and the maximum available line for home equity lines of credit, divided by the estimated current value of the underlying property.
(3)
Average LTV/CLTV at loan origination calculations are based on LTV/CLTV at time of purchase for one- to four-family purchased loans and home equity installment loans and maximum available line for home equity lines of credit.
 
One- to Four-Family
 
Home Equity
 
December 31,
 
December 31,
Current FICO (1)
2015
 
2014
 
2015
 
2014
>=720
$
1,423

 
$
1,734

 
$
1,069

 
$
1,487

719 - 700
246

 
296

 
222

 
292

699 - 680
198

 
260

 
183

 
238

679 - 660
150

 
197

 
152

 
203

659 - 620
198

 
237

 
203

 
258

<620
273

 
336

 
285

 
356

Total mortgage loans receivable
$
2,488

 
$
3,060

 
$
2,114

 
$
2,834

(1)
FICO scores are updated on a quarterly basis; however, there were approximately $39 million and $49 million of one- to four-family loans at December 31, 2015 and 2014, respectively, and $3 million and $4 million of home equity loans, respectively, for which the updated FICO scores were not available. For these loans, the current FICO distribution included the most recent FICO scores where available, otherwise the original FICO score was used.
Concentrations of Credit Risk
One- to four-family loans include interest-only loans for a five to ten year period, followed by an amortizing period ranging from 20 to 25 years. At December 31, 2015, 39% of the Company's one- to four-family portfolio was not yet amortizing. However, during the year ended December 31, 2015, approximately 15% of these borrowers made voluntary annual principal payments of at least $2,500 and over a third of those borrowers made voluntary annual principal payments of at least $10,000.
The home equity loan portfolio is primarily second lien loans on residential real estate properties, which have a higher level of credit risk than first lien mortgage loans. Approximately 13% of the home equity portfolio was in the first lien position and the Company holds both the first and second lien positions in less than 1% of the home equity loan portfolio at December 31, 2015. The home equity loan portfolio consists of approximately 18% of home equity installment loans and approximately 82% of home equity lines of credit at December 31, 2015.
Home equity installment loans are primarily fixed rate and fixed term, fully amortizing loans that do not offer the option of an interest-only payment. The majority of home equity lines of credit convert to amortizing loans at the end of the draw period, which typically ranges from five to ten years. Approximately 4% of this portfolio will require the borrowers to repay the loan in full at the end of the draw period. At December 31, 2015, 61% of the home equity line of credit portfolio had not converted from the interest-only draw period and had not begun amortizing. However, during the year ended December 31, 2015, approximately 40% of the borrowers made annual principal payments of at least $500 on their home equity lines of credit and slightly under half of those borrowers reduced their principal balance by at least $2,500.
The following table outlines when one- to four-family and home equity lines of credit convert to amortizing by percentage of the one- to four-family portfolio and home equity line of credit portfolios, respectively, at December 31, 2015:
Period of Conversion to Amortizing Loan
% of One- to Four-Family
Portfolio
 
% of Home Equity Line of 
Credit Portfolio
Already amortizing
61%
 
39%
Through December 31, 2016
17%
 
45%
Year ending December 31, 2017
22%
 
15%
Year ending December 31, 2018 or later
—%
 
1%

Approximately 37% and 38% of the Company’s mortgage loans receivable were concentrated in California at December 31, 2015 and 2014, respectively. No other state had concentrations of mortgage loans that represented 10% or more of the Company’s mortgage loans receivable at December 31, 2015 and 2014.
Delinquent Loans
The following table shows total loans receivable by delinquency category at December 31, 2015 and 2014 (dollars in millions): 
 
Current
 
30-89 Days
Delinquent
 
90-179 Days
Delinquent
 
180+ Days
Delinquent
 
Total
December 31, 2015
 
 
 
 
 
 
 
 
 
One- to four-family
$
2,279

 
$
72

 
$
26

 
$
111

 
$
2,488

Home equity
1,978

 
52

 
31

 
53

 
2,114

Consumer and other
334

 
6

 
1

 
—

 
341

Total loans receivable
$
4,591

 
$
130

 
$
58

 
$
164

 
$
4,943

December 31, 2014
 
 
 
 
 
 
 
 
 
One- to four-family
$
2,813

 
$
88

 
$
28

 
$
131

 
$
3,060

Home equity
2,702

 
60

 
29

 
43

 
2,834

Consumer and other
447

 
7

 
1

 
—

 
455

Total loans receivable
$
5,962

 
$
155

 
$
58

 
$
174

 
$
6,349


Nonperforming Loans
The Company classifies loans as nonperforming when they are no longer accruing interest, which includes loans that are 90 days and greater past due, TDRs that are on nonaccrual status for all classes of loans (including loans in bankruptcy) and certain junior liens that have a delinquent senior lien. The following table shows the comparative data for nonperforming loans at December 31, 2015 and 2014 (dollars in millions):
  
December 31,
 
2015
 
2014
One- to four-family
$
263

 
$
294

Home equity
154

 
165

Consumer and other
1

 
1

Total nonperforming loans receivable
$
418

 
$
460


Real Estate Owned and Loans with Formal Foreclosure Proceedings in Process
At December 31, 2015 and 2014, the Company held $27 million and $36 million, respectively, of real estate owned that were acquired through foreclosure or through a deed in lieu of foreclosure or similar legal agreement. The Company also held $108 million and $107 million of loans for which formal foreclosure proceedings were in process at December 31, 2015 and 2014, respectively.
Allowance for Loan Losses
The following table provides a roll forward by loan portfolio of the allowance for loan losses for the year ended December 31, 2015, 2014 and 2013 (dollars in millions): 
 
Year Ended December 31, 2015
 
One- to
Four-Family
 
Home
Equity
 
Consumer
and Other
 
Total
Allowance for loan losses, beginning of period
$
27

 
$
367

 
$
10

 
$
404

Provision (benefit) for loan losses
15

 
(55
)
 
—

 
(40
)
Charge-offs
(2
)
 
(31
)
 
(11
)
 
(44
)
Recoveries(1)
—

 
26

 
7

 
33

Charge-offs, net
(2
)
 
(5
)
 
(4
)
 
(11
)
Allowance for loan losses, end of period
$
40

 
$
307

 
$
6

 
$
353

 
Year Ended December 31, 2014
 
One- to
Four-Family
 
Home
Equity
 
Consumer
and Other
 
Total
Allowance for loan losses, beginning of period
$
102

 
$
326

 
$
25

 
$
453

Provision (benefit) for loan losses
(42
)
 
82

 
(4
)
 
36

Charge-offs
(44
)
 
(65
)
 
(17
)
 
(126
)
Recoveries(1)
11

 
24

 
6

 
41

Charge-offs, net
(33
)
 
(41
)
 
(11
)
 
(85
)
Allowance for loan losses, end of period
$
27

 
$
367

 
$
10

 
$
404

 
 
 
 
 
 
 
 
 
Year Ended December 31, 2013
 
One- to
Four-Family
 
Home
Equity
 
Consumer
and Other
 
Total
Allowance for loan losses, beginning of period
$
184

 
$
257

 
$
40

 
$
481

Provision (benefit) for loan losses
(55
)
 
192

 
6

 
143

Charge-offs
(41
)
 
(157
)
 
(33
)
 
(231
)
Recoveries
14

 
34

 
12

 
60

Charge-offs, net
(27
)
 
(123
)
 
(21
)
 
(171
)
Allowance for loan losses, end of period
$
102

 
$
326

 
$
25

 
$
453

(1)
Includes one-time payments from third party mortgage originators of $2 million and $11 million to satisfy in full all pending and future repurchase requests with them for the years ended December 31, 2015 and 2014, respectively.    
Total loans receivable designated as held-for-investment decreased $1.4 billion during the year ended December 31, 2015. The allowance for loan losses was $353 million, or 7% of total loans receivable, as of December 31, 2015 compared to $404 million, or 6% of total loans receivable, as of December 31, 2014.
Impaired Loans—Troubled Debt Restructurings
TDRs include two categories of loans: (1) loan modifications completed under the Company’s programs that involve granting an economic concession to a borrower experiencing financial difficulty, and (2) loans that have been charged off based on the estimated current value of the underlying property less estimated selling costs due to bankruptcy notification.
Delinquency status is the primary measure the Company uses to evaluate the performance of loans modified as TDRs. As mentioned above, the Company classifies loans as nonperforming when they are no longer accruing interest, which includes loans that are 90 days and greater past due, TDRs that are on nonaccrual status for all classes of loans, including loans in bankruptcy, and certain junior liens that have a delinquent senior lien. The following table shows a summary of the Company’s recorded investment in TDRs that were on accrual and nonaccrual status, further disaggregated by delinquency status, in addition to the recorded investment in TDRs at December 31, 2015 and 2014 (dollars in millions): 
  
 
 
Nonaccrual TDRs
 
 
 
Accrual 
TDRs(1)
 
Current(2)
 
30-89 Days
Delinquent
 
90-179 Days
Delinquent
 
180+ Days
Delinquent
 
Total Recorded
Investment in 
TDRs (3)(4)
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
One- to four-family
$
106

 
$
106

 
$
19

 
$
8

 
$
47

 
$
286

Home equity
120

 
42

 
11

 
8

 
21

 
202

Total
$
226

 
$
148

 
$
30

 
$
16

 
$
68

 
$
488

December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
One- to four-family
$
121

 
$
111

 
$
24

 
$
12

 
$
48

 
$
316

Home equity
127

 
51

 
14

 
6

 
19

 
217

Total
$
248

 
$
162

 
$
38

 
$
18

 
$
67

 
$
533

(1)
Represents loans modified as TDRs that are current and have made six or more consecutive payments.
(2)
Represents loans modified as TDRs that are current but have not yet made six consecutive payments, bankruptcy loans and certain junior lien TDRs that have a delinquent senior lien.
(3)
The unpaid principal balance in one- to four-family TDRs was $283 million and $314 million at December 31, 2015 and 2014, respectively. For home equity loans, the recorded investment in TDRs represents the unpaid principal balance.
(4)
Total recorded investment in TDRs at December 31, 2015 consisted of $334 million of loans modified as TDRs and $154 million of loans that have been charged off due to bankruptcy notification. Total recorded investment in TDRs at December 31, 2014 consisted of $354 million of loans modified as TDRs and $179 million of loans that have been charged off due to bankruptcy notification.
The following table shows the average recorded investment and interest income recognized both on a cash and accrual basis for the Company’s TDRs during the year ended December 31, 2015, 2014 and 2013 (dollars in millions): 
 
Average Recorded Investment
 
Interest Income Recognized
 
December 31,
 
December 31,
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
One- to four-family
$
303

 
$
576

 
$
1,205

 
$
9

 
$
16

 
$
33

Home equity
213

 
227

 
262

 
17

 
18

 
20

Total
$
516

 
$
803

 
$
1,467

 
$
26

 
$
34

 
$
53


The decrease in the average recorded investments of one- to four-family TDRs comparing the year ended December 31, 2015 and 2014 was primarily due to the sale of $0.8 billion of one- to four-family loans modified as TDRs during 2014.
Included in the allowance for loan losses was a specific valuation allowance of $61 million and $66 million that was established for TDRs at December 31, 2015 and 2014, respectively. The specific allowance for these individually impaired loans represents the forecasted losses over the estimated remaining life of the loans, including the economic concessions granted to the borrowers. The following table shows detailed information related to the Company’s TDRs at December 31, 2015 and 2014 (dollars in millions): 
  
December 31, 2015
 
December 31, 2014
 
Recorded
Investment
in TDRs
 
Specific
Valuation
Allowance
 
Net Investment
in TDRs
 
Recorded
Investment
in TDRs
 
Specific
Valuation
Allowance
 
Net Investment
in TDRs
With a recorded allowance:
 
 
 
 
 
 
 
 
 
 
 
One- to four-family
$
72

 
$
9

 
$
63

 
$
88

 
$
9

 
$
79

Home equity
$
111

 
$
52

 
$
59

 
$
118

 
$
57

 
$
61

Without a recorded allowance:(1)
 
 
 
 
 
 
 
 
 
 
 
One- to four-family
$
214

 
$
—

 
$
214

 
$
228

 
$
—

 
$
228

Home equity
$
91

 
$
—

 
$
91

 
$
99

 
$
—

 
$
99

Total:
 
 
 
 
 
 
 
 
 
 
 
One- to four-family
$
286

 
$
9

 
$
277

 
$
316

 
$
9

 
$
307

Home equity
$
202

 
$
52

 
$
150

 
$
217

 
$
57

 
$
160

(1)
Represents loans where the discounted cash flow analysis or collateral value is equal to or exceeds the recorded investment in the loan.
Troubled Debt Restructurings — Loan Modifications
The Company has loan modification programs that focus on the mitigation of potential losses in the one- to four-family and home equity mortgage loan portfolio. The Company currently does not have an active loan modification program for consumer and other loans. The various types of economic concessions that may be granted in a loan modification typically consist of interest rate reductions, maturity date extensions, principal forgiveness or a combination of these concessions. The Company uses specialized servicers that focus on loan modifications and pursue trial modifications for loans that are more than 180 days delinquent. Trial modifications are classified immediately as TDRs and continue to be reported as delinquent until the successful completion of the trial period, which is typically 90 days. The loan then becomes a permanent modification reported as current but remains on nonaccrual status until six consecutive payments have been made.
The vast majority of the Company’s loans modified as TDRs include an interest rate reduction in combination with another type of concession. The Company prioritizes the interest rate reduction modifications in combination with the following modification categories: principal forgiven, principal deferred and re-age/extension/capitalization of accrued interest. Each class is mutually exclusive in that if a modification had an interest rate reduction with principal forgiven and an extension, the modification would only be presented in the principal forgiven column in the table below. The following tables provide the number of loans, post-modification balances immediately after being modified by major class, and the financial impact of modifications during the years ended December 31, 2015, 2014 and 2013 (dollars in millions):
 
Year Ended December 31, 2015
 
 
 
Interest Rate Reduction
 
 
 
 
 
Number of
Loans
 
Principal
Forgiven
 
Principal Deferred
 
Re-age/
Extension/
Interest
Capitalization
 
Other with
Interest Rate
Reduction
 
Other
 
Total
One- to four-family
34

 
$
—

 
$
1

 
$
9

 
$
—

 
$
3

 
$
13

Home equity
367

 
—

 
—

 
3

 
2

 
19

 
24

Total
401

 
$
—

 
$
1

 
$
12

 
$
2

 
$
22

 
$
37

 
Year Ended December 31, 2014
 
 
 
Interest Rate Reduction
 
 
 
 
 
Number of
Loans
 
Principal
Forgiven
 
Principal Deferred
 
Re-age/
Extension/
Interest
Capitalization
 
Other with
Interest Rate
Reduction
 
Other
 
Total
One- to four-family
64

 
$
1

 
$
—

 
$
11

 
$
2

 
$
6

 
$
20

Home equity
195

 
—

 
—

 
4

 
2

 
9

 
15

Total
259

 
$
1

 
$
—

 
$
15

 
$
4

 
$
15

 
$
35

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2013
 
 
 
Interest Rate Reduction
 
 
 
 
 
Number of
Loans
 
Principal
Forgiven
 
Principal Deferred
 
Re-age/
Extension/
Interest
Capitalization
 
Other with
Interest Rate
Reduction
 
Other
 
Total
One- to four-family
324

 
$
19

 
$
5

 
$
71

 
$
11

 
$
18

 
$
124

Home equity
253

 
—

 
—

 
7

 
7

 
7

 
21

Total
577

 
$
19

 
$
5

 
$
78

 
$
18

 
$
25

 
$
145

The Company had less than $1 million in principal forgiven during the years ended December 31, 2015 and 2014. During the year ended December 31, 2013, the Company had principal forgiven of $7 million on one-to four family loans, with a pre-modification weighted average interest rate of 5.2% and a post-modification weighted average interest rate of 2.3%.
The Company considers modifications that become 30 days past due to have experienced a payment default. The following table shows the recorded investment in modifications that experienced a payment default within 12 months after the modification for the years ended December 31, 2015, 2014 and 2013 (dollars in millions): 
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
Number of
Loans
 
Recorded
Investment
 
Number of
Loans
 
Recorded
Investment
 
Number of
Loans
 
Recorded
Investment
One- to four-family(1)
7

 
$
3

 
27

 
$
9

 
142

 
$
53

Home equity(2)(3)
90

 
5

 
55

 
3

 
69

 
3

Total
97

 
$
8

 
82

 
$
12

 
211

 
$
56

(1)
For years ended December 31, 2015, 2014 and 2013 less than $1 million, $1 million and $18 million, respectively, of the recorded investment in one- to four-family loans that had a payment default in the trailing 12 months was classified as current.
(2)
For the years ended December 31, 2015, 2014 and 2013, $3 million, $1 million and $1 million, respectively, of the recorded investment in home equity loans that had a payment default in the trailing 12 months was classified as current.
(3)
The majority of these home equity modifications during the year ended December 31, 2015 experienced servicer transfers during this same period.