Loans Held-for-Investment

12 Months Ended

Dec. 31, 2011

Loans Held-for-Sale and Loans Held-for-Investment [Abstract]

Loans Held-for-Investment

Note 8 — Loans Held-for-Investment

Loans held-for-investment are summarized as follows:

	December 31, 2011			December 31, 2010
	(Dollars in thousands)
Consumer loans:
Residential first mortgage	$	3,749,063		$	3,784,700
Second mortgage		138,912			174,789
Construction		758			8,012
Warehouse lending		1,173,898			720,770
HELOC		221,986			271,326
Other		67,613			86,710
Total consumer loans		5,352,230			5,046,307
Commercial loans:
Commercial real estate		1,242,969			1,250,301
Commercial and industrial		330,099			8,875
Commercial lease financing		113,289			—
Total commercial loans		1,686,357			1,259,176
Total consumer and commercial loans held-for-investment		7,038,587			6,305,483
Less allowance for loan losses		(318,000	)		(274,000	)
Loans held-for-investment, net	$	6,720,587		$	6,031,483

For the year ended December 31, 2011, the Company transferred $16.7 million in loans held-for-sale to loans held-for-investment. The loans transferred were carried at fair value, and will continue to be reported at fair value while classified as held-for-investment. During the year ended December 31, 2011, the Company sold $83.5 million of non-performing commercial real estate assets. During the year ended December 31, 2010, the Company transferred $578.2 million of non-performing residential first mortgage loans from loans held-for-investment to loans held-for-sale, in connection with the $474.0 million sale of non-performing residential first mortgage loans and the transfer of $104.2 million in similar loans to held-for-sale.

The Company’s commercial leasing activities consist primarily of equipment leases. Generally, lessees are responsible for all maintenance, taxes, and insurance on leased properties. The following table lists the components of the net investment in financing leases.

	December 31, 2011			December 31, 2010
	(Dollars in thousands)
Total minimum lease payments to be received	$	115,216		$	—
Estimated residual values of leased assets		6,967			—
Less: unearned income		(8,894	)		—
Net investment in commercial financing leases	$	113,289		$	—

The following outlines the Company’s minimum lease payment receivable for direct financing leases for the five succeeding years and thereafter. The Company had no commercial financing leases at December 31, 2010.

	December 31, 2011
	(Dollars in thousands)
2012	$	20,789
2013		20,999
2014		21,222
2015		22,210
2016		16,245
Thereafter		13,751
Total	$	115,216

The allowance for loan losses by class of loan is summarized in the following tables.

	Residential First Mortgage			Second Mortgage			Construction			Warehouse Lending			HELOC			Other Consumer			Commercial Real Estate			Commercial and Industrial			Commercial Lease Financing		Total
	(Dollars in thousands)
For the year ended December 31, 2011
Beginning balance allowance for loan losses	$	120,976		$	25,187		$	1,461		$	4,171		$	21,369		$	3,450		$	95,844		$	1,542		$	—	$	274,000
Charge-offs		(41,140	)		(19,217	)		(419	)		(1,122	)		(16,980	)		(4,729	)		(57,626	)		(644	)		—		(141,877	)
Recoveries		1,654			1,642			2			5			1,510			1,603			2,408			122			—		8,946
Provision		97,521			9,054			(837	)		(1,804	)		8,946			2,110			56,358			4,405			1,178		176,931
Ending balance allowance for loan losses	$	179,011		$	16,666		$	207		$	1,250		$	14,845		$	2,434		$	96,984		$	5,425		$	1,178	$	318,000
For the year ended December 31, 2010
Beginning balance allowance for loan losses	$	274,933		$	40,887		$	2,388		$	3,766		$	37,054		$	3,998		$	157,998		$	2,976		$	—	$	524,000
Charge-offs		(473,614	)		(27,846	)		(581	)		(2,154	)		(21,495	)		(5,583	)		(153,020	)		(1,181	)		—		(685,474	)
Recoveries		2,506			1,806			7			516			1,531			1,615			1,123			17			—		9,121
Provision		317,151			10,340			(353	)		2,043			4,279			3,420			89,743			(270	)		—		426,353
Ending balance allowance for loan losses	$	120,976		$	25,187		$	1,461		$	4,171		$	21,369		$	3,450		$	95,844		$	1,542		$	—	$	274,000
For the year ended December 31, 2009
Beginning balance allowance for loan losses	$	159,764		$	16,674		$	3,352		$	3,432		$	13,242		$	2,024		$	176,476		$	1,036		$	—	$	376,000
Charge-offs		(127,257	)		(42,696	)		(2,922	)		(1,123	)		(35,807	)		(7,422	)		(146,822	)		(727	)		—		(364,776	)
Recoveries		2,801			889			36			12			822			1,260			2,586			—			—		8,406
Provision		239,625			66,020			1,922			1,445			58,797			8,136			125,758			2,667			—		504,370
Ending balance allowance for loan losses	$	274,933		$	40,887		$	2,388		$	3,766		$	37,054		$	3,998		$	157,998		$	2,976		$	—	$	524,000
	Residential First Mortgage			Second Mortgage			Construction			Warehouse Lending			HELOC			Other Consumer			Commercial Real Estate			Commercial and Industrial			Commercial Lease Financing		Total
	(Dollars in thousands)
December 31, 2011
Loans held-for-investment
Individually evaluated(2)	$	744,300		$	14,237		$	304		$	307		$	1,775		$	2		$	207,144		$	2,402		$	—	$	970,472
Collectively evaluated(3)		3,004,763			124,675			454			1,173,591			220,211			67,611			1,035,825			327,697			113,289		6,068,115
Total loans	$	3,749,063		$	138,912		$	758		$	1,173,898		$	221,986		$	67,613		$	1,242,969		$	330,099		$	113,289	$	7,038,587
Allowance for loan losses
Individually evaluated(2)	$	113,491		$	4,738		$	78		$	—		$	1,775		$	2		$	53,146		$	1,588		$	—	$	174,818
Collectively evaluated(3)		65,520			11,928			129			1,250			13,070			2,432			43,838			3,837			1,178		143,182
Total allowance for loan losses	$	179,011		$	16,666		$	207		$	1,250		$	14,845		$	2,434		$	96,984		$	5,425		$	1,178	$	318,000
December 31, 2010
Loans held-for-investment
Individually evaluated(2)	$	602,036		$	13,471		$	1,364		$	—		$	52		$	—		$	234,535		$	1,619		$	—	$	853,077
Collectively evaluated(3)		3,182,664			161,318			6,648			720,770			271,274			86,710			1,015,766			7,256			—		5,452,406
Total loans	$	3,784,700		$	174,789		$	8,012		$	720,770		$	271,326		$	86,710		$	1,250,301		$	8,875		$	—	$	6,305,483
Allowance for loan losses
Individually evaluated(2)	$	49,493		$	1,868		$	458		$	—		$	7		$	—		$	54,260		$	425		$	—	$	106,511
Collectively evaluated(3)		71,483			23,319			1,003			4,171			21,362			3,450			41,584			1,117			—		167,489
Total allowance for loan losses	$	120,976		$	25,187		$	1,461		$	4,171		$	21,369		$	3,450		$	95,844		$	1,542		$	—	$	274,000

(1) Consumer loans include: residential first mortgages, second mortgages, construction, warehouse lending and consumer loans. Commercial loans include: commercial real estate, commercial and industrial, and commercial lease financing.

(2) Represents loans individually evaluated for impairment in accordance with ASC 310-10, Receivables (formerly FAS 114), and pursuant to amendments by ASU 2010-20 regarding allowance for impaired loans.

(3) Represents loans collectively evaluated for impairment in accordance with ASC 450-20, Loss Contingencies (formerly FAS 5), and pursuant to amendments by ASU 2010-20 regarding allowance for unimpaired loans.

There were loans totaling $5.6 million and $11.5 million greater than 90 days past due that were still accruing interest as of December 31, 2011 and 2010, respectively. The following table presents an aging analysis of past due loans by class of loan.

	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Investment Loans		90 Days and Still Accruing
	(Dollars in thousands)
December 31, 2011
Consumer loans:
Residential first mortgage	$	74,934	$	37,493	$	371,756	$	484,183	$	3,264,880	$	3,749,063	$	—
Second mortgage		1,887		1,527		6,236		9,650		129,262		138,912		—
Construction		—		—		758		758		—		758		—
Warehouse lending		—		—		28		28		1,173,870		1,173,898		—
HELOC		5,342		2,111		7,973		15,426		206,560		221,986		—
Other		1,507		471		611		2,589		65,024		67,613		34
Total consumer loans		83,670		41,602		387,362		512,634		4,839,596		5,352,230		34
Commercial loans:
Commercial real estate		7,453		12,323		99,335		119,111		1,123,858		1,242,969		5,536
Commercial and industrial		11		62		1,670		1,743		328,356		330,099		65
Commercial lease financing		—		—		—		—		113,289		113,289		—
Total commercial loans		7,464		12,385		101,005		120,854		1,565,503		1,686,357		5,601
Total loans	$	91,134	$	53,987	$	488,367	$	633,488	$	6,405,099	$	7,038,587	$	5,635
December 31, 2010
Consumer loans:
Residential first mortgage	$	96,768	$	40,826	$	119,903	$	257,497	$	3,527,203	$	3,784,700	$	—
Second mortgage		3,587		1,963		7,480		13,030		161,759		174,789		—
Construction		—		—		3,021		3,021		4,991		8,012		—
Warehouse lending		—		—		—		—		720,770		720,770		—
HELOC		3,735		3,783		6,713		14,231		257,095		271,326		—
Other		939		335		822		2,096		84,614		86,710		52
Total consumer loans		105,029		46,907		137,939		289,875		4,756,432		5,046,307		52
Commercial loans:
Commercial real estate		28,245		6,783		175,559		210,587		1,039,714		1,250,301		8,143
Commercial and industrial		175		55		4,918		5,148		3,727		8,875		3,300
Total commercial loans		28,420		6,838		180,477		215,735		1,043,441		1,259,176		11,443
Total loans	$	133,449	$	53,745	$	318,416	$	505,610	$	5,799,873	$	6,305,483	$	11,495

Loans on which interest accruals have been discontinued totaled approximately $482.7 million at December 31, 2011 and $306.9 million at December 31, 2010. Interest on these loans is recognized as income when collected. Interest that would have been accrued on such loans totaled approximately $19.6 million, $15.5 million, and $31.0 million during 2011, 2010, and 2009, respectively.

For all classes within the consumer and commercial loan portfolios, delinquent loans are calculated utilizing a reporting convention that considers a loan past due when the borrower fails to make a second consecutive scheduled payment (Federal Financial Institutions Examination Council (“FFIEC”) guideline method). This method considers a loan to be delinquent if no payment is received after the first day of the month following the month of the missed payment. Other companies with mortgage banking operations similar to ours may use the Mortgage Bankers Association Method (“MBA Method”) which considers a loan to be delinquent if payment is not received by the end of the month of the missed payment. The key difference between the two methods is that a loan considered “delinquent” under the MBA Method would not be considered “delinquent” under the other method for another 30 days. Under the MBA Method of calculating delinquent loans, 30 day delinquencies equaled $166.3 million, 60 day delinquencies equaled $95.0 million and greater than 90 day delinquencies equaled $529.5 million at December 31, 2011. Total delinquent loans under the MBA Method would be $790.8 million or 11.2 percent of loans held-for-investment at December 31, 2011. By comparison, 30 days delinquencies equaled $215.0 million, 60 days delinquencies equaled $111.4 million and greater than 90 days delinquencies equaled $365.0 million at December 31, 2010 under the MBA Method and total delinquent loans under the MBA Method were $691.4 million or 11.0 percent of loans held-for-investment at December 31, 2010.

Loan Modifications

A portion of the Company’s residential first mortgages have been modified under company-developed programs. These programs first require an extension of term followed by a reduction of the interest rate. As of December 31, 2011 and 2010, 489 accounts with a balance of $181.0 million and 1,725 accounts with a balance of $615.4 million, respectively, of residential first mortgage loans have been modified and were still outstanding on the Consolidated Statements of Financial Condition.

As of December 31, 2011 and 2010, approximately $47.2 million and $98.6 million, respectively, in commercial loan balances had been modified, primarily consisting of commercial real estate loans.

Periodically, the Company will restructure a note into two separate notes (A/B structure), charging off the entire B portion of the note. The A note is structured with appropriate loan-to-value and cash flow coverage ratios that provide for a high likelihood of repayment. The A note is classified as a non-performing note until the borrower has displayed a historical payment performance for a reasonable period of time subsequent to the restructuring. A period of sustained repayment for at least six months generally is required to return the note to accrual status provided that management has determined that the performance is reasonably expected to continue. The A note will be classified as a restructured note (either performing or nonperforming) through the calendar year in which historical payment performance on the restructured note has been established. As of December 31, 2011 and 2010, there was approximately $21.8 million and $17.0 million, respectively, in carrying amount representing ten and six A/B structures, respectively.

Troubled Debt Restructurings

The following table provides a summary of TDRs by type and performing status at December 31, 2011.

	TDRs
	Performing		Non-performing		Total
	(Dollars in thousands)
Consumer loans:(1)
Residential first mortgage	$	488,896	$	165,655	$	654,551
Second mortgage		10,542		1,419		11,961
Other consumer		—		2		2
Total consumer loans		499,438		167,076		666,514
Commercial loans:(2)
Commercial real estate		17,737		29,509		47,246
Commercial and industrial		—		—		—
Total commercial loans		17,737		29,509		47,246
Total TDRs	$	517,175	$	196,585	$	713,760

(1) The allowance for loan losses on consumer TDR loans totaled $85.2 million at December 31, 2011.

(2) The allowance for loan losses on commercial TDR loans totaled $32.2 million at December 31, 2011.

At December 31, 2011, TDRs totaled $713.8 million of which $196.6 million were non-performing, compared to December 31, 2010, at which date TDRs totaled $729.6 million and $124.5 million were non-performing. TDRs returned to performing (accrual) status totaled $127.8 million during the year ended December 31, 2011, and are excluded from non-performing loans. These loans have demonstrated a period of at least six months of consecutive performance under the modified terms. At December 31, 2011 and 2010, remaining commitments to lend additional funds to debtors whose terms have been modified in a commercial or consumer TDR were immaterial.

Some loan modifications classified as TDRs may not ultimately result in the full collection of principal and interest, as modified, and result in potential incremental losses. These potential incremental losses have been factored into the Company’s overall allowance for loan losses estimate. Once a loan becomes a TDR, it will continue to be reported as a TDR until it is ultimately repaid in full, or foreclosed and sold. The Company has allocated reserves in the allowance for loan loss for the TDR portfolio of $117.4 million and $78.5 million at December 31, 2011, and 2010, respectively.

The following table presents the December 31, 2011 number of accounts, pre-modification unpaid principal balance, and post-modification unpaid principal balance that were new modified TDRs during the year ended December 31, 2011. In addition, the table presents the number of accounts and unpaid principal balance of loans that have subsequently defaulted during the year ended December 31, 2011 that had been modified in a TDR during the 12 months preceding each quarterly period. All TDR classes within consumer and commercial loan portfolios are considered subsequently defaulted as of greater than 90 days past due.

	For the Year Ended December 31, 2011
	Number of Accounts		Pre-Modification Unpaid Principal Balance		Post-Modification Unpaid Principal Balance (1)		Change in Allowance at Modification
New troubled debt restructurings
Residential first mortgages		455	$	168,849	$	171,649	$	(5,021	)
Second mortgages		27		1,999		2,012		—
Other consumer		1		2		2		—
Commercial real estate		6		12,025		7,298		(1,011	)
Total TDR loans		489	$	182,875	$	180,961	$	(6,032	)

	Number of Accounts		Unpaid Principal Balance		Change in Allowance at Modification
Troubled debt restructurings that subsequently defaulted in previous 12 months
Residential first mortgages		35	$	10,796	$	1,854
Second mortgages		2		233		—
Total TDR loans		37	$	11,029	$	1,854

(1) Post-modification balances include past due amounts that are capitalized at modification date.

The following table presents impaired loans with no related allowance and with an allowance recorded.

	December 31, 2011						December 31, 2010
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	(Dollars in thousands)
With no related allowance recorded:
Consumer loans:
Residential first mortgage loans	$	45,604	$	45,604	$	—	$	42,255	$	42,255	$	—
Warehouse lending		307		869		—		—		—		—
Commercial loans:
Commercial real estate		47,564		49,156		—		59,642		107,254		—
Commercial and industrial(1)		—		—		—		64		274		—
	$	93,475	$	95,629	$	—	$	101,961	$	149,783	$	—
With an allowance recorded:
Consumer loans:
Residential first mortgage	$	698,696	$	698,696	$	113,491	$	559,781	$	559,781	$	49,493
Second mortgage		14,237		14,237		4,738		13,471		13,471		1,868
Construction		304		304		78		1,364		1,364		458
Warehouse lending		—		—		—		—		—		—
HELOC		1,775		1,775		1,775		52		52		7
Other consumer		2		2		2		—		—		—
Commercial loans:
Commercial real estate		159,581		166,874		53,145		174,893		224,334		54,260
Commercial and industrial(1)		2,402		2,402		1,588		1,555		1,555		425
	$	876,997	$	884,290	$	174,817	$	751,116	$	800,557	$	106,511
Total
Consumer loans:
Residential first mortgage	$	744,300	$	744,300	$	113,491	$	602,036	$	602,036	$	49,493
Second mortgage		14,237		14,237		4,738		13,471		13,471		1,868
Construction		304		304		78		1,364		1,364		458
Warehouse lending		307		869		—		—		—		—
HELOC		1,775		1,775		1,775		52		52		7
Other consumer		2		2		2		—		—		—
Commercial loans:
Commercial real estate		207,145		216,030		53,145		234,535		331,588		54,260
Commercial and industrial(1)		2,402		2,402		1,588		1,619		1,829		425
Total impaired loans	$	970,472	$	979,919	$	174,817	$	853,077	$	950,340	$	106,511

(1) These impaired loans are from originations prior to 2011.

	For the Year Ended December 31,
	2011				2010
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)
Consumer loans:
Residential first mortgage	$	624,444	$	17,068	$	607,713	$	22,855
Second mortgage		13,521		508		13,987		551
Construction		660		—		1,803		3
Warehouse lending		235		—		—		—
HELOC		365		12		55		3
Commercial loans:
Commercial real estate		198,872		5,843		363,709		7,612
Commercial and industrial(1)		2,155		87		3,320		6
Total impaired loans	$	840,252	$	23,518	$	990,587	$	31,030

(1) These impaired loans are from originations prior to 2011.

The Company utilizes an internal risk rating system which is applied to all commercial and commercial real estate credits. Loan officers are responsible for continually assigning grades to these loans based on standards outlined in the Company’s credit policy. Internal loan grades are also monitored by the Company’s loan review department to ensure consistency and strict adherence to the prescribed standards. Loan grades are assigned loss component factors that reflect the Company’s loss estimate for each class of loans. Factors considered in assigning loan grades and loss component factors include borrower-specific information related to expected future cash flows and operating results, collateral values, financial condition, payment status, and other information; levels of and trends in portfolio charge-offs and recoveries; levels of and trends in portfolio delinquencies and impaired loans; changes in the risk profile of specific portfolios; trends in volume and terms of loans; effects of changes in credit concentrations; and observed trends and practices in the banking industry. Generally, these indicators are updated quarterly unless market indicators. Descriptions of the Company’s internal risk ratings as they relate to credit quality are as follows:

Pass.  Pass assets are not impaired nor do they have any known deficiencies that could impact the quality of the asset.

Special mention/watch.  Assets identified as special mention possess credit deficiencies or potential weaknesses deserving management’s close attention. Special mention assets have a potential weakness or pose an unwarranted financial risk that, if not corrected, could weaken the assets and increase risk in the future.

Substandard.  Assets identified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. For HELOC and other consumer loans, the Company evaluates credit quality based on the aging and status of payment activity and includes all non-performing loans.

Doubtful.  Assets identified as doubtful have all the weaknesses inherent in those classified substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. The possibility of a loss on a doubtful asset is high. However, due to important and reasonably specific pending factors, which may work to strengthen (or weaken) the asset, its classification as an estimated loss is deferred until its more exact status can be determined.

	As of December 31, 2011
Commercial Credit Exposure	Commercial  Real Estate		Commercial and Industrial		Commercial Lease Financing		Total Commercial
	(Dollars in thousands)
Grade:
Pass	$	702,641	$	326,140	$	113,289	$	1,142,070
Special mention/watch		347,440		1,595		—		349,035
Substandard		192,853		2,364		—		195,217
Doubtful		35		—		—		35
Total loans	$	1,242,969	$	330,099	$	113,289	$	1,686,357

	As of December 31, 2011
Consumer Credit Exposure	Residential First Mortgage		Second Mortgage		Construction		Warehouse		Total
	(Dollars in thousands)
Grade:
Pass	$	3,430,894	$	132,671	$	—	$	1,173,591	$	4,737,156
Special mention/watch		—		—		—		—		—
Substandard		318,169		6,241		758		307		325,475
Total loans	$	3,749,063	$	138,912	$	758	$	1,173,898	$	5,062,631

	As of December 31, 2011
	HELOC		Other Consumer		Total
	(Dollars in thousands)
Pass	$	213,912	$	67,002	$	280,914
Substandard		8,074		611		8,685
Total loans	$	221,986	$	67,613	$	289,599

	As of December 31, 2010
Commercial Credit Exposure	Commercial  Real Estate		Commercial and Industrial		Total Commercial
	(Dollars in thousands)
Grade:
Pass	$	609,239	$	2,937	$	612,176
Special mention/watch		430,714		4,174		434,888
Substandard		210,245		1,764		212,009
Doubtful		103		—		103
Total loans	$	1,250,301	$	8,875	$	1,259,176

	As of December 31, 2010
Consumer Credit Exposure	Residential First Mortgage		Second Mortgage		Construction		Warehouse		Total
	(Dollars in thousands)
Grade:
Pass	$	3,713,761	$	167,309	$	4,991	$	718,484	$	4,604,545
Special mention/watch		989		—		—		411		1,400
Substandard		69,950		7,480		3,021		1,875		82,326
Total loans	$	3,784,700	$	174,789	$	8,012	$	720,770	$	4,688,271

	As of December 31, 2010
	HELOC		Other Consumer		Total
	(Dollars in thousands)
Pass	$	264,612	$	85,889	$	350,501
Substandard		6,713		821		7,534
Total loans	$	271,325	$	86,710	$	358,035