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Loans Receivable, Net
 12 Months Ended
Dec. 31, 2019
Loans and Leases Receivable Disclosure [Abstract]  
LOANS RECEIVABLE, NET
NOTE 7—LOANS RECEIVABLE, NET

The following table presents loans receivable 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, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
One- to four-family
 
$
718

 
$
39

 
$
11

 
$
35

 
$
803

 
$
5

 
$
(6
)
 
$
802

Home equity
 
590

 
21

 
7

 
17

 
635

 
—

 
(11
)
 
624

Securities-based lending(1)
 
169

 
—

 
—

 
—

 
169

 
—

 
—

 
169

Total loans receivable(2)
 
$
1,477

 
$
60

 
$
18

 
$
52

 
$
1,607

 
$
5

 
$
(17
)
 
$
1,595

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
One- to four-family
 
$
958

 
$
48

 
$
9

 
$
56

 
$
1,071

 
$
7

 
$
(9
)
 
$
1,069

Home equity
 
774

 
25

 
13

 
24

 
836

 
—

 
(26
)
 
810

Consumer
 
117

 
1

 
—

 
—

 
118

 
1

 
(2
)
 
117

Securities-based lending(1)
 
107

 
—

 
—

 
—

 
107

 
—

 
—

 
107

Total loans receivable
 
$
1,956

 
$
74

 
$
22

 
$
80

 
$
2,132

 
$
8

 
$
(37
)
 
$
2,103


(1)
E*TRADE Line of Credit is a securities-based lending product where customers can borrow against the market value of their securities pledged as collateral. The unused credit line amount totaled $431 million and $173 million as of December 31, 2019 and December 31, 2018, respectively.
(2)
The Company sold its consumer loan portfolio in December 2019 and recognized a corresponding reduction in the allowance for loan losses.
At December 31, 2019, the Company pledged $1.2 billion of loans as collateral to the FHLB. At December 31, 2018, the Company pledged $1.6 billion and $0.1 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 present the distribution of the Company’s mortgage loan portfolios by credit quality indicator (dollars in millions):
 
One- to Four-Family
 
Home Equity
 
December 31,
 
December 31,
Current LTV/CLTV(1)
2019
 
2018
 
2019
 
2018
<=80%
$
661

 
$
823

 
$
377

 
$
454

80%-100%
97

 
165

 
154

 
215

100%-120%
26

 
45

 
68

 
110

>120%
19

 
38

 
36

 
57

Total mortgage loans receivable
$
803

 
$
1,071

 
$
635

 
$
836

Average estimated current LTV/CLTV (2)
61
%
 
66
%
 
76
%
 
80
%
Average LTV/CLTV at loan origination (3)
70
%
 
70
%
 
82
%
 
82
%
 
(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
2019
 
2018
 
2019
 
2018
>=720
$
462

 
$
617

 
$
333

 
$
442

719 - 700
77

 
89

 
61

 
78

699 - 680
55

 
80

 
54

 
70

679 - 660
40

 
66

 
43

 
56

659 - 620
63

 
79

 
59

 
80

<620
106

 
140

 
85

 
110

Total mortgage loans receivable
$
803

 
$
1,071

 
$
635

 
$
836


One- to four-family loans include loans with an interest-only period, followed by an amortizing period. At December 31, 2019, 100% of these loans were amortizing. 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, 2019, substantially all of the HELOC portfolio had converted from the interest-only draw period.
The weighted average age of our mortgage and consumer loans receivable was 13.7 and 12.8 years at December 31, 2019 and 2018, respectively. Approximately 32% and 33% of the Company’s mortgage loans receivable were concentrated in California at December 31, 2019 and 2018, respectively. Approximately 10% of the Company's mortgage loans receivable were concentrated in New York at both December 31, 2019 and 2018. No other state had concentrations of mortgage loans that represented 10% or more of the Company’s mortgage loans receivable at December 31, 2019 or 2018.
At December 31, 2019, 23% and 20% of the Company’s past-due mortgage loans were concentrated in California and New York, respectively. No other state had concentrations of past-due mortgage loans that represented 10% or more of the Company's past-due mortgage loans. At December 31, 2019, 41% and 10% of the Company’s impaired mortgage loans were concentrated in California and New York, respectively. No other state had concentrations of impaired mortgage loans that represented 10% or more of the Company's impaired mortgage loans.
Nonperforming Loans
The Company classifies loans as nonperforming when they are no longer accruing interest. The following table presents nonperforming loans by loan portfolio (dollars in millions):
 
December 31,
 
2019
 
2018
One- to four-family
$
114

 
$
139

Home equity
54

 
71

Total nonperforming loans receivable
$
168

 
$
210


At both December 31, 2019 and 2018, the Company held $13 million of real estate owned that was acquired through foreclosure or through a deed in lieu of foreclosure or similar legal agreement. The Company held $32 million and $51 million of loans for which formal foreclosure proceedings were in process at December 31, 2019 and 2018, 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 (dollars in millions):
 
December 31, 2019
 
One- to
Four-Family
 
Home
Equity
 
Total(1)(2)
General reserve:
 
 
 
 
 
Quantitative component
$
2

 
$
1

 
$
3

Qualitative component
(1
)
 
—

 
(1
)
Specific valuation allowance
5

 
10

 
15

Total allowance for loan losses
$
6

 
$
11

 
$
17

Allowance as a % of loans receivable(3)
0.7
%
 
1.7
%
 
1.1
%
 
December 31, 2018
 
One- to
Four-Family
 
Home
Equity
 
Consumer
 
Total(2)
General reserve:
 
 
 
 
 
 
 
Quantitative component
$
4

 
$
6

 
$
2

 
$
12

Qualitative component
—

 
1

 
—

 
1

Specific valuation allowance
5

 
19

 
—

 
24

Total allowance for loan losses
$
9

 
$
26

 
$
2

 
$
37

Allowance as a % of loans receivable(3)
0.8
%
 
3.1
%
 
1.0
%
 
1.7
%
(1)
The Company sold its consumer loan portfolio in December 2019 and recognized a corresponding reduction in the allowance for loan losses.
(2)
Securities-based lending loans were fully collateralized by cash and securities with fair values in excess of borrowings at both December 31, 2019 and 2018, respectively.
(3)
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 presents a roll forward by loan portfolio of the allowance for loan losses (dollars in millions):
 
Year Ended December 31, 2019
 
One- to
Four-Family
 
Home
Equity
 
Consumer(1)
 
Total
Allowance for loan losses, beginning of period
$
9

 
$
26

 
$
2

 
$
37

Provision (benefit) for loan losses
(9
)
 
(41
)
 
(1
)
 
(51
)
Charge-offs(2)
—

 
—

 
(3
)
 
(3
)
Recoveries(3)
6

 
26

 
2

 
34

Net (charge-offs) recoveries
6

 
26

 
(1
)
 
31

Allowance for loan losses, end of period(4)
$
6

 
$
11

 
$
—

 
$
17

 
 
 
 
 
 
 
 
 
Year Ended December 31, 2018
 
One- to
Four-Family
 
Home
Equity
 
Consumer
 
Total
Allowance for loan losses, beginning of period
$
24

 
$
46

 
$
4

 
$
74

Provision (benefit) for loan losses
(22
)
 
(63
)
 
(1
)
 
(86
)
Charge-offs(2)
—

 
—

 
(4
)
 
(4
)
Recoveries(3)
7

 
43

 
3

 
53

Net (charge-offs) recoveries
7

 
43

 
(1
)
 
49

Allowance for loan losses, end of period(4)
$
9

 
$
26

 
$
2

 
$
37

 
 
 
 
 
 
 
 
 
Year Ended December 31, 2017
 
One- to
Four-Family
 
Home
Equity
 
Consumer
 
Total
Allowance for loan losses, beginning of period
$
45

 
$
171

 
$
5

 
$
221

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

 
(168
)
Charge-offs(2)
—

 
(7
)
 
(6
)
 
(13
)
Recoveries
8

 
23

 
3

 
34

Net (charge-offs) recoveries
8

 
16

 
(3
)
 
21

Allowance for loan losses, end of period(4)
$
24

 
$
46

 
$
4

 
$
74


(1)
The Company sold its consumer loan portfolio in December 2019 and recognized a corresponding reduction in the allowance for loan losses.
(2)
Includes benefits resulting from recoveries of partial charge-offs due to principal paydowns or payoffs for the periods presented. The benefits included in the charge-offs line item exceeded other charge-offs for one- to four-family portfolio during the years ended December 31, 2019, 2018 and 2017, respectively. The benefits included in the charge-offs line item exceeded other charge-offs for the home equity loan portfolio during the years ended December 31, 2019 and 2018, respectively.
(3)
Includes $3 million of recoveries recognized during the year ended December 31, 2019 and $15 million of recoveries recognized during the year ended December 31, 2018 related to the sale of previously charged-off home equity loans.
(4)
Securities-based lending loans were fully collateralized by cash and securities with fair values in excess of borrowings for the years ended December 31, 2019, 2018 and 2017, respectively.
Total loans receivable designated as held-for-investment decreased $0.5 billion during the year ended December 31, 2019. The allowance for loan losses was $17 million, or 1.1% of total loans receivable, as of December 31, 2019 compared to $37 million, or 1.7% of total loans receivable, as of December 31, 2018. Net recoveries for the year ended December 31, 2019 were $31 million compared to $49 million in the same period in 2018.
The benefit for loan losses was $51 million for the year ended December 31, 2019. The timing and magnitude of the provision (benefit) for loan losses is affected by many factors that could result in variability. These benefits reflected better than expected performance of our portfolio as well as recoveries in excess of prior expectations, including sales of charged-off loans and recoveries of previous charge-offs, as applicable, that were not included in our loss estimates.
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 portfolio (dollars in millions):
 
Recorded Investment
 
Allowance for Loan Losses
 
December 31,
 
December 31,
 
2019
 
2018
 
2019
 
2018
Collectively evaluated for impairment:
 
 
 
 
 
 
 
One- to four-family
$
640

 
$
891

 
$
1

 
$
4

Home equity
523

 
698

 
1

 
7

Consumer(1)
—

 
119

 
—

 
2

Securities-based lending
169

 
107

 
—

 
—

Total collectively evaluated for impairment
1,332

 
1,815

 
2

 
13

Individually evaluated for impairment:
 
 
 
 
 
 
 
One- to four-family
168

 
187

 
5

 
5

Home equity
112

 
138

 
10

 
19

Total individually evaluated for impairment
280

 
325

 
15

 
24

Total
$
1,612

 
$
2,140

 
$
17

 
$
37


(1)
The Company sold its consumer loan portfolio in December 2019 and recognized a corresponding reduction in the allowance for loan losses.
Impaired Loans—Troubled Debt Restructurings
The Company considers a loan to be impaired when it meets the definition of a TDR. 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 presents a summary of the Company’s recorded investment in TDRs that were on accrual and nonaccrual status, further disaggregated by delinquency status (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, 2019:
 
 
 
 
 
 
 
 
 
 
 
One- to four-family
$
81

 
$
57

 
$
10

 
$
3

 
$
17

 
$
168

Home equity
73

 
20

 
8

 
2

 
9

 
112

Total
$
154

 
$
77

 
$
18

 
$
5

 
$
26

 
$
280

 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018:
 
 
 
 
 
 
 
 
 
 
 
One- to four-family
$
87

 
$
61

 
$
12

 
$
4

 
$
23

 
$
187

Home equity
90

 
23

 
8

 
5

 
12

 
138

Total
$
177

 
$
84

 
$
20

 
$
9

 
$
35

 
$
325


(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 $46 million and $97 million for one-to four-family and home equity loans, respectively, as of December 31, 2019 and $55 million and $121 million, respectively, as of December 31, 2018.
(4)
Total recorded investment in TDRs at December 31, 2019 consisted of $223 million of loans modified as TDRs and $57 million of loans that have been charged off due to bankruptcy notification. Total recorded investment in TDRs at December 31, 2018 consisted of $253 million of loans modified as TDRs and $72 million of loans that have been charged off due to bankruptcy notification.
The following table presents the monthly average recorded investment and interest income recognized both on a cash and accrual basis for the Company's TDRs (dollars in millions):
 
Average Recorded Investment
 
Interest Income Recognized
 
December 31,
 
December 31,
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
One- to four-family
$
177

 
$
201

 
$
221

 
$
8

 
$
9

 
$
9

Home equity
125

 
152

 
179

 
12

 
13

 
16

Total
$
302

 
$
353

 
$
400

 
$
20

 
$
22

 
$
25


The following table presents detailed information related to the Company’s TDRs and specific valuation allowances (dollars in millions):
 
December 31, 2019
 
December 31, 2018
 
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
$
45

 
$
5

 
$
40

 
$
50

 
$
5

 
$
45

Home equity
$
45

 
$
10

 
$
35

 
$
60

 
$
19

 
$
41

Without a recorded allowance:(1)
 
 
 
 
 
 
 
 
 
 
 
One- to four-family
$
123

 
$
—

 
$
123

 
$
137

 
$
—

 
$
137

Home equity
$
67

 
$
—

 
$
67

 
$
78

 
$
—

 
$
78

Total:
 
 
 
 
 
 
 
 
 
 
 
One- to four-family
$
168

 
$
5

 
$
163

 
$
187

 
$
5

 
$
182

Home equity
$
112

 
$
10

 
$
102

 
$
138

 
$
19

 
$
119

(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 table presents the number of loans and post-modification balances immediately after being modified by major class (dollars in millions):
 
 
 
 
 
Interest Rate Reduction
 
 
 
 
 
Number of
Loans
 
Re-age/
Extension/
Interest
Capitalization
 
Other with
Interest Rate
Reduction
 
Other(1)
 
Total
December 31, 2019:
 
 
 
 
 
 
 
 
 
One- to four-family
30
 
$
6

 
$
—

 
$
6

 
$
12

Home equity
44
 
3

 
—

 
—

 
3

Total
74
 
$
9

 
$
—

 
$
6

 
$
15

 
 
 
 
 
 
 
 
 
 
December 31, 2018:
 
 
 
 
 
 
 
 
 
One- to four-family
49
 
$
14

 
$
—

 
$
7

 
$
21

Home equity
91
 
5

 
1

 
1

 
7

Total
140
 
$
19

 
$
1

 
$
8

 
$
28

 
 
 
 
 
 
 
 
 
 
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

(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.