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Loans Receivable, Net
 12 Months Ended
Dec. 31, 2017
Loans and Leases Receivable Disclosure [Abstract]  
LOANS RECEIVABLE, NET
NOTE 7—LOANS RECEIVABLE, NET

The following table presents loans receivable at December 31, 2017 and 2016 disaggregated by delinquency status (dollars in millions):
 
 
Days Past Due
 
 
 
 
 
Current
30-89
90-179
180+
Total
Unamortized premiums, net
Allowance for loans losses
Loans Receivable, Net
December 31, 2017
 
 
 
 
 
 
 
 
One- to four-family
$
1,269

$
59

$
22

$
82

$
1,432

$
9

$
(24
)
$
1,417

Home equity
1,014

36

15

32

1,097

—

(46
)
1,051

Consumer and other
185

3

—

—

188

2

(4
)
186

Total loans receivable
$
2,468

$
98

$
37

$
114

$
2,717

$
11

$
(74
)
$
2,654

 
 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
 
 
One- to four-family
$
1,774

$
67

$
23

$
86

$
1,950

$
13

$
(45
)
$
1,918

Home equity
1,442

43

18

53

1,556

—

(171
)
1,385

Consumer and other
245

4

1

—

250

3

(5
)
248

Total loans receivable
$
3,461

$
114

$
42

$
139

$
3,756

$
16

$
(221
)
$
3,551


During the year ended December 31, 2017, the Company sold certain loans with a carrying value of $41 million for proceeds that approximated book value. The Company also transferred loans with a carrying value of $17 million to held-for-sale during the year ended December 31, 2017. These loans are reflected within other assets on the consolidated balance sheet at December 31, 2017.
At December 31, 2017, the Company pledged $2.2 billion and $0.2 billion of loans as collateral to the FHLB and Federal Reserve Bank of Richmond, respectively. At December 31, 2016, the Company pledged $3.1 billion and $0.3 billion of loans as collateral to the FHLB and Federal Reserve Bank of Richmond, respectively.
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. The following tables show the distribution of the Company’s mortgage loan portfolios by credit quality indicator at December 31, 2017 and 2016 (dollars in millions):
 
One- to Four-Family
 
Home Equity
 
December 31,
 
December 31,
Current LTV/CLTV(1)
2017
 
2016
 
2017
 
2016
<=80%
$
1,031

 
$
1,308

 
$
531

 
$
686

80%-100%
256

 
413

 
291

 
414

100%-120%
91

 
143

 
176

 
274

>120%
54

 
86

 
99

 
182

Total mortgage loans receivable
$
1,432

 
$
1,950

 
$
1,097

 
$
1,556

Average estimated current LTV/CLTV (2)
70
%
 
73
%
 
84
%
 
87
%
Average LTV/CLTV at loan origination (3)
71
%
 
71
%
 
81
%
 
81
%
 
(1)
Current CLTV calculations for home equity loans are based on the maximum available line for HELOCs and outstanding principal balance for HEILs. 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 value estimates are updated on a quarterly basis.
(2)
The average estimated current LTV/CLTV ratio reflects the outstanding balance at the balance sheet date and the maximum available line for HELOCs, 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, HEILs and the maximum available line for HELOCs.
 
One- to Four-Family
 
Home Equity
 
December 31,
 
December 31,
Current FICO
2017
 
2016
 
2017
 
2016
>=720
$
805

 
$
1,121

 
$
548

 
$
778

719 - 700
138

 
179

 
106

 
156

699 - 680
105

 
153

 
93

 
141

679 - 660
78

 
121

 
79

 
117

659 - 620
122

 
154

 
103

 
149

<620
184

 
222

 
168

 
215

Total mortgage loans receivable
$
1,432

 
$
1,950

 
$
1,097

 
$
1,556


One- to four-family loans include loans with an interest-only period, followed by an amortizing period. At December 31, 2017, nearly 100% of these loans were amortizing and this portfolio will be fully converted in 2018. The home equity loan portfolio consists of HEILs and HELOCs. HEILs are primarily fully amortizing loans that do not offer the option of an interest-only payment. The majority of HELOCs had an interest only draw period at origination and converted to amortizing loans at the end of the draw period. At December 31, 2017, nearly 100% of the HELOC portfolio had converted from the interest-only draw period and will be fully converted in 2019.
The weighted average age of our mortgage and consumer loans receivable was 11.8 and 10.8 years at December 31, 2017 and 2016, respectively. Approximately 34% and 36% of the Company’s mortgage loans receivable were concentrated in California at December 31, 2017 and 2016, respectively. No other state had concentrations of mortgage loans that represented 10% or more of the Company’s mortgage loans receivable at December 31, 2017 and 2016.
Nonperforming Loans
The Company classifies loans as nonperforming when they are no longer accruing interest. The following table shows the comparative data for nonperforming loans at December 31, 2017 and 2016 (dollars in millions):
 
December 31,
 
2017
 
2016
One- to four-family
$
192

 
$
215

Home equity
98

 
136

Consumer and other
—

 
1

Total nonperforming loans receivable
$
290

 
$
352


At December 31, 2017 and 2016, the Company held $26 million and $35 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 held $101 million and $112 million of loans for which formal foreclosure proceedings were in process at December 31, 2017 and 2016, respectively.
Allowance for Loan Losses
The allowance for loan losses is management’s estimate of probable losses inherent in the loan portfolio at the balance sheet date, as well as the forecasted losses, including economic concessions to borrowers, over the estimated remaining life of loans modified as TDRs. The general allowance for loan losses includes a qualitative component to account for a variety of factors that present additional uncertainty that may not be fully considered in the quantitative loss model but are factors we believe may impact the level of credit losses.
The following table presents the allowance for loan losses by loan portfolio at December 31, 2017 and 2016 (dollars in millions): 
 
One- to Four-Family
 
Home Equity
 
Consumer and other
 
Total
 
December 31,
 
December 31,
 
December 31,
 
December 31,
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
General reserve:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quantitative component
$
15

 
$
34

 
$
14

 
$
118

 
$
4

 
$
5

 
$
33

 
$
157

Qualitative component
3

 
4

 
3

 
2

 
—

 
—

 
6

 
6

Specific valuation allowance
6

 
7

 
29

 
51

 
—

 
—

 
35

 
58

Total allowance for loan losses
$
24

 
$
45

 
$
46

 
$
171

 
$
4

 
$
5

 
$
74

 
$
221

Allowance as a % of loans
receivable(1)
1.6
%

2.3
%
 
4.2
%
 
11.0
%
 
2.1
%
 
1.9
%
 
2.7
%
 
5.8
%
(1)
Allowance as a percentage of loans receivable is calculated based on the gross loans receivable including net unamortized premiums for each respective category.

The following table provides a roll forward by loan portfolio of the allowance for loan losses for the years ended December 31, 2017, 2016 and 2015 (dollars in millions):
 
Year Ended December 31, 2017
 
One- to
Four-Family
 
Home
Equity
 
Consumer and other
 
Total
Allowance for loan losses, beginning of period
$
45

 
$
171

 
$
5

 
$
221

Provision (benefit) for loan losses
(29
)
 
(141
)
 
2

 
(168
)
Charge-offs
—

 
(7
)
 
(6
)
 
(13
)
Recoveries
8

 
23

 
3

 
34

Net (charge-offs) recoveries
8

 
16

 
(3
)
 
21

Allowance for loan losses, end of period
$
24

 
$
46

 
$
4

 
$
74

 
 
 
 
 
 
 
 
 
Year Ended December 31, 2016
 
One- to
Four-Family
 
Home
Equity
 
Consumer and other
 
Total
Allowance for loan losses, beginning of period
$
40

 
$
307

 
$
6

 
$
353

Provision (benefit) for loan losses
(2
)
 
(148
)
 
1

 
(149
)
Charge-offs
(1
)
 
(17
)
 
(7
)
 
(25
)
Recoveries
8

 
29

 
5

 
42

Net (charge-offs) recoveries
7

 
12

 
(2
)
 
17

Allowance for loan losses, end of period
$
45

 
$
171

 
$
5

 
$
221

 
 
 
 
 
 
 
 
 
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
—

 
26

 
7

 
33

Net (charge-offs) recoveries
(2
)
 
(5
)
 
(4
)
 
(11
)
Allowance for loan losses, end of period
$
40

 
$
307

 
$
6

 
$
353


Total loans receivable designated as held-for-investment decreased $0.9 billion during the year ended December 31, 2017. The allowance for loan losses was $74 million, or 2.7% of total loans receivable, as of December 31, 2017 compared to $221 million, or 5.8% of total loans receivable, as of December 31, 2016. Net recoveries for the year ended December 31, 2017 were $21 million compared to $17 million in the same period in 2016.
The benefit for loan losses of $168 million for the year ended December 31, 2017 reflected approximately $70 million of benefit recognized during the second quarter of 2017 resulting from refined default assumptions based on the sustained outperformance of converted mortgage loans that had been amortizing for 12 months or longer. At the time of this refinement in the second quarter of 2017, more than 50% of these converted loans had been amortizing 12 months or longer. This actual performance data was better than prior performance assumptions and, combined with the substantial performance history, the uncertainty with respect to the population of converting loans had significantly decreased. In order to refine the default assumptions around the remaining population that had not yet started amortizing or that had not reached 12 months post conversion, the Company evaluated whether the credit quality and performance of these loans was consistent with the seasoned amortizing portfolio. The Company determined that FICO scores, LTV/CLTVs and delinquency rates were comparable to the seasoned portfolio, and therefore applied the refined default assumptions to this remaining population.
The benefits to provision for loan losses also reflect recoveries in excess of prior estimates, including recoveries of previous charge-offs. The timing and magnitude of charge-offs and recoveries are affected by many factors and we anticipate variability from quarter to quarter.
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, 2017 and 2016 (dollars in millions):
 
Recorded Investment
 
Allowance for Loan Losses
 
December 31,
 
December 31,
 
2017
 
2016
 
2017
 
2016
Collectively evaluated for impairment:
 
 
 
 
 
 
 
One- to four-family
$
1,228

 
$
1,717

 
$
18

 
$
38

Home equity
932

 
1,361

 
17

 
120

Consumer and other
190

 
253

 
4

 
5

Total collectively evaluated for impairment
2,350

 
3,331

 
39

 
163

Individually evaluated for impairment:
 
 
 
 
 
 
 
One- to four-family
213

 
246

 
6

 
7

Home equity
165

 
195

 
29

 
51

Total individually evaluated for impairment
378

 
441

 
35

 
58

Total
$
2,728

 
$
3,772

 
$
74

 
$
221


Impaired Loans—Troubled Debt Restructurings
Delinquency status is the primary measure the Company uses to evaluate the performance of loans modified as TDRs. The Company classifies loans as nonperforming when they are no longer accruing interest. The recorded investment in loans modified as TDRs includes the charge-offs related to certain loans that were written down to estimated current value of the underlying property less estimated selling costs.
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, 2017 and 2016 (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, 2017
 
 
 
 
 
 
 
 
 
 
 
One- to four-family
$
83

 
$
74

 
$
13

 
$
5

 
$
38

 
$
213

Home equity
104

 
34

 
10

 
4

 
13

 
165

Total
$
187

 
$
108

 
$
23

 
$
9

 
$
51

 
$
378

December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
One- to four-family
$
97

 
$
90

 
$
16

 
$
8

 
$
35

 
$
246

Home equity
119

 
41

 
10

 
4

 
21

 
195

Total
$
216

 
$
131

 
$
26

 
$
12

 
$
56

 
$
441


(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)
Total recorded investment in TDRs includes premium (discount), as applicable, and is net of charge-offs, which were $67 million and $144 million for one-to four-family and home equity loans, respectively, as of December 31, 2017 and $79 million and $178 million, respectively, as of December 31, 2016.
(4)
Total recorded investment in TDRs at December 31, 2017 consisted of $285 million of loans modified as TDRs and $93 million of loans that have been charged off due to bankruptcy notification. Total recorded investment in TDRs at December 31, 2016 consisted of $316 million of loans modified as TDRs and $125 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 years ended December 31, 2017, 2016 and 2015 (dollars in millions):
 
Average Recorded Investment
 
Interest Income Recognized
 
December 31,
 
December 31,
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
One- to four-family
$
221

 
$
269

 
$
303

 
$
9

 
$
11

 
$
9

Home equity
179

 
204

 
213

 
16

 
17

 
17

Total
$
400

 
$
473

 
$
516

 
$
25

 
$
28

 
$
26


The following table shows detailed information related to the Company’s TDRs and specific valuation allowances at December 31, 2017 and 2016 (dollars in millions):
  
December 31, 2017
 
December 31, 2016
 
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
$
54

 
$
6

 
$
48

 
$
61

 
$
7

 
$
54

Home equity
$
83

 
$
29

 
$
54

 
$
111

 
$
51

 
$
60

Without a recorded allowance:(1)
 
 
 
 
 
 
 
 
 
 
 
One- to four-family
$
159

 
$
—

 
$
159

 
$
185

 
$
—

 
$
185

Home equity
$
82

 
$
—

 
$
82

 
$
84

 
$
—

 
$
84

Total:
 
 
 
 
 
 
 
 
 
 
 
One- to four-family
$
213

 
$
6

 
$
207

 
$
246

 
$
7

 
$
239

Home equity
$
165

 
$
29

 
$
136

 
$
195

 
$
51

 
$
144

(1)
Represents loans where the discounted cash flow analysis or collateral value is equal to or exceeds the recorded investment in the loan.
The following tables provide the number of loans and post-modification balances immediately after being modified by major class during the years ended December 31, 2017, 2016 and 2015 (dollars in millions):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Rate Reduction
 
 
 
 
 
Number of
Loans
 
Principal Forgiven
 
Deferred Principal
 
Re-age/
Extension/
Interest
Capitalization
 
Other with
Interest Rate
Reduction
 
Other(1)
 
Total
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
One- to four-family
40

 
$
—

 
$
—

 
$
13

 
$
1

 
$
4

 
$
18

Home equity
294

 
—

 
—

 
12

 
1

 
9

 
22

Total
334

 
$
—

 
$
—

 
$
25

 
$
2

 
$
13

 
$
40

 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
One- to four-family
47

 
$
1

 
$
—

 
$
8

 
$
2

 
$
7

 
$
18

Home equity
518

 
—

 
—

 
8

 
3

 
25

 
36

Total
565

 
$
1

 
$
—

 
$
16

 
$
5

 
$
32

 
$
54

 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
One- to four-family
34

 
$
—

 
$
1

 
$
9

 
$
—

 
$
3

 
$
13

Home equity
367

 
—

 
—

 
3

 
2

 
19

 
24

Total
401

 
$
—

 
$
1

 
$
12

 
$
2

 
$
22

 
$
37


(1)
Amounts represent loans whose terms were modified in a manner that did not result in an interest rate reduction, including re-aged loans, extensions, and loans with capitalized interest.