Receivables

Receivables consisted of the following:



	March 31, 2015			December 31, 2014
	(in millions)
Real estate secured:
First lien	$	19,308		$	20,153
Second lien	2,421			2,517
Total real estate secured receivables	21,729			22,670
Accrued interest income and other	776			789
Credit loss reserve for receivables	(2,110		)	(2,217		)
Total receivables, net	$	20,395		$	21,242

Deferred origination fees, net of costs, totaled $154 million and $159 million at March 31, 2015 and December 31, 2014, respectively, and are included in the receivable balance. Net unamortized premium on our receivables totaled $72 million and $76 million at March 31, 2015 and December 31, 2014, respectively, and are also included in the receivable balance.

Collateralized funding transactions Secured financings previously issued under public trusts with a balance of $1,083 million at March 31, 2015 are secured by $1,984 million of closed-end real estate secured receivables. Secured financings previously issued under public trusts with a balance of $1,489 million at December 31, 2014 were secured by $2,999 million of closed-end real estate secured receivables.

Age Analysis of Past Due Receivables The following tables summarize the past due status of our receivables at March 31, 2015 and December 31, 2014. The aging of past due amounts is determined based on the contractual delinquency status of payments made under the terms of the receivable. An account is generally considered to be contractually delinquent when payments have not been made in accordance with the loan terms. Delinquency status is affected by customer account management policies and practices such as re-aging.



	Past Due				Total Past Due				Total Receivables⁽²⁾
March 31, 2015	30 – 89 days		90+ days		Total Past Due		Current⁽¹⁾		Total Receivables⁽²⁾
	(in millions)
Real estate secured:
First lien	$	1,275	$	677	$	1,952	$	17,356	$	19,308
Second lien	130		88		218		2,203		2,421
Total real estate secured receivables	$	1,405	$	765	$	2,170	$	19,559	$	21,729



	Past Due				Total Past Due				Total Receivables⁽²⁾
December 31, 2014	30 – 89 days		90+ days		Total Past Due		Current⁽¹⁾		Total Receivables⁽²⁾
	(in millions)
Real estate secured:
First lien	$	1,572	$	902	$	2,474	$	17,679	$	20,153
Second lien	165		100		265		2,252		2,517
Total real estate secured receivables	$	1,737	$	1,002	$	2,739	$	19,931	$	22,670


⁽¹⁾	Receivables less than 30 days past due are presented as current.

⁽²⁾

The receivable balances included in this table reflects the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies and includes certain basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. However, these basis adjustments on the loans are excluded in other presentations of dollars of two-months-and-over contractual delinquency, nonaccrual receivable and nonperforming receivable account balances.

Nonaccrual receivables Nonaccrual consumer receivables and nonaccrual receivables held for sale are all receivables which are 90 or more days contractually delinquent as well as second lien loans (regardless of delinquency status) where the first lien loan that we own or service is 90 or more days contractually delinquent. Nonaccrual receivables do not include receivables which have made qualifying payments and have been re-aged such that the contractual delinquency status has been reset to current. If a re-aged loan subsequently experiences payment default and becomes 90 or more days contractually delinquent, it will be reported as nonaccrual. Nonaccrual receivables and nonaccrual receivables held for sale consisted of the following:



	March 31, 2015		December 31, 2014
	(in millions)
Nonaccrual receivable portfolios⁽¹⁾:
Real estate secured⁽²⁾	$	778	$	1,024
Receivables held for sale⁽³⁾	647		509
Total nonaccrual receivables⁽⁴⁾	$	1,425	$	1,533

⁽¹⁾

The receivable balances included in this table reflects the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies but excludes any basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. Additionally, the balances in this table related to receivables which have been classified as held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.


⁽²⁾	At March 31, 2015 and December 31, 2014, nonaccrual real estate secured receivables held for investment include $298 million and $417 million, respectively, of receivables that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.

⁽³⁾

For a discussion of the movements between the components of nonaccrual receivables, see Note 5, "Receivables Held for Sale," which includes discussion of the formal program introduced in the second quarter of 2013 to transfer receivables (meeting pre-determined criteria) to held for sale when the receivable is written down to the lower of amortized cost or fair value of the collateral less cost to sell in accordance with our existing charge-off policies.


⁽⁴⁾	Nonaccrual receivables do not include receivables totaling $682 million and $627 million at March 31, 2015 and December 31, 2014, respectively, which have been written down to the lower of amortized cost or fair value of the collateral less cost to sell which are less than 90 days contractually delinquent and not accruing interest.

The following table provides additional information on our total nonaccrual receivables:



Three Months Ended March 31,	2015		2014
	(in millions)
Interest income that would have been recorded if the nonaccrual receivable had been current in accordance with contractual terms during the period	$	39	$	93
Interest income that was recorded on nonaccrual receivables included in interest income on nonaccrual loans during the period	5		8

Troubled Debt Restructurings We report as trouble debt restructurings ("TDR Loans") substantially all receivables modified as a result of a financial difficulty, regardless of whether the modification was permanent or temporary, including all modifications with trial periods. Additionally, we report as TDR Loans all re-ages, except first time early stage delinquency re-ages where the customer has not been granted a prior re-age or modification. TDR Loans also include receivables discharged under Chapter 7 bankruptcy and not re-affirmed. TDR Loans are considered to be impaired loans. The TDR Loan balances in the tables below reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies and includes all basis adjustments on the loan, such as unearned income, unamortized deferred fees and costs on originated loans and premiums or discounts on purchased loans. Additionally, the carrying amount of TDR Loans classified as held for sale has been reduced by both the lower of amortized cost or fair value adjustment as well as the credit loss reserves associated with these receivables prior to the transfer.

Modifications for real estate secured and personal non-credit card receivables may include changes to one or more terms of the loan, including, but not limited to, a change in interest rate, an extension of the amortization period, a reduction in payment amount and partial forgiveness or deferment of principal. A substantial amount of our modifications involve interest rate reductions which lower the amount of interest income we are contractually entitled to receive for a period of time in future periods. By lowering the interest rate and making other changes to the loan terms, we believe we are able to increase the amount of cash flow that will ultimately be collected from the loan, given the borrower's financial condition. Re-aging is an account management action that results in the resetting of the contractual delinquency status of an account to current which generally requires the receipt of two qualifying payments. TDR Loans are reserved for based on the present value of expected future cash flows discounted at the loans' original effective interest rate which generally results in a higher reserve requirement for these loans. The portion of the credit loss reserves on TDR Loans that is associated with the discounting of cash flows is released from credit loss reserves over the life of the TDR Loan.

The following table presents information about receivables and receivables held for sale which as a result of any account management action taken during the three months ended March 31, 2015 and 2014 became classified as TDR Loans.



Three Months Ended March 31,	2015		2014
	(in millions)
Real estate secured:
First lien	$	125	$	225
Second lien	16		28
Real estate secured receivables held for sale	10		19
Total⁽¹⁾	$	151	$	272


⁽¹⁾	The following table summarizes the actions taken during the three months ended March 31, 2015 and 2014 which resulted in the above receivables being classified as a TDR Loan.



Three Months Ended March 31,	2015		2014
	(in millions)
Modifications, primarily interest rate modifications	$	60	$	84
Re-age of past due account	91		188
Total	$	151	$	272

Receivables and receivables held for sale reported as TDR Loans consisted of the following:



	March 31, 2015		December 31, 2014
	(in millions)
TDR Loans:⁽¹⁾⁽²⁾
Real estate secured:
First lien⁽⁴⁾	$	9,315	$	9,630
Second lien⁽⁴⁾	886		915
Real estate secured receivables held for sale⁽³⁾	831		650
Total real estate secured TDR Loans	$	11,032	$	11,195

Credit loss reserves for TDR Loans:⁽⁵⁾
Real estate secured:
First lien	$	1,679	$	1,738
Second lien	218		244
Total credit loss reserves for real estate secured TDR Loans⁽³⁾	$	1,897	$	1,982


⁽¹⁾	TDR Loans are considered to be impaired loans regardless of accrual status.


⁽²⁾	The following table reflects the unpaid principal balance of TDR Loans:



	March 31, 2015		December 31, 2014
	(in millions)
Real estate secured:
First lien	$	9,552	$	9,931
Second lien	1,014		1,050
Real estate secured receivables held for sale	1,289		1,004
Total real estate secured TDR Loans	$	11,855	$	11,985

At March 31, 2015 and December 31, 2014, the unpaid principal balances reflected above include $624 million and $549 million, respectively, which have received a reduction in the unpaid principal balance as part of an account management action.


⁽³⁾	There are no credit loss reserves associated with receivables classified as held for sale as they are carried at the lower of amortized cost or fair value.


⁽⁴⁾	At March 31, 2015 and December 31, 2014, TDR Loans held for investment totaling $399 million and $517 million, respectively, are recorded at the lower of amortized cost or fair value of the collateral less cost to sell.


⁽⁵⁾	Included in credit loss reserves.

The following table discloses receivables and receivables held for sale which were classified as TDR Loans during the previous 12 months which subsequently became sixty days or greater contractually delinquent during the three months ended March 31, 2015 and 2014.



Three Months Ended March 31,	2015		2014
	(in millions)
Real estate secured:
First lien	$	55	$	142
Second lien	9		17
Real estate secured receivables held for sale	2		16
Total	$	66	$	175

The following table provides additional information relating to TDR Loans, including TDR Loans held for sale:



Three Months Ended March 31,	2015		2014
	(in millions)
Average balance of TDR Loans:
Real estate secured:
First lien	$	10,207	$	11,990
Second lien	900		1,035
Total average balance of TDR Loans	$	11,107	$	13,025
Interest income recognized on TDR Loans:
Real estate secured:
First lien	$	180	$	206
Second lien	22		25
Total interest income recognized on TDR Loans	$	202	$	231

Consumer Receivable Credit Quality Indicators Credit quality indicators used for consumer receivables include a loan’s delinquency status, whether the loan is performing and whether the loan is a TDR Loan.

Delinquency The following table summarizes dollars of two-months-and-over contractual delinquency and as a percent of total receivables and receivables held for sale (“delinquency ratio”) for our loan portfolio:



	March 31, 2015				December 31, 2014
	Dollars of Delinquency		Delinquency Ratio		Dollars of Delinquency		Delinquency Ratio
	(dollars are in millions)
Real estate secured receivables⁽¹⁾:
First lien	$	1,063	5.51	%	$	1,388	6.89	%
Second lien	131		5.41		154		6.12
Real estate secured receivables held for sale	673		61.35		530		61.63
Total real estate secured receivables⁽²⁾	$	1,867	8.18	%	$	2,072	8.81	%

⁽¹⁾

The receivable balances included in this table reflects the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies but excludes any basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. Additionally, the balances in this table related to receivables which have been classified as held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.


⁽²⁾	At March 31, 2015 and December 31, 2014, total real estate secured receivables includes $762 million and $745 million, respectively, that are in the process of foreclosure.

Nonperforming The following table summarizes the status of receivables and receivables held for sale:



	Accruing Loans		Nonaccrual Loans⁽⁴⁾		Total
	(in millions)
At March 31, 2015⁽¹⁾
Real estate secured⁽²⁾⁽³⁾	$	20,951	$	778	$	21,729
Real estate secured receivables held for sale	450		647		1,097
Total	$	21,401	$	1,425	$	22,826
At December 31, 2014⁽¹⁾
Real estate secured⁽²⁾⁽³⁾	$	21,646	$	1,024	$	22,670
Real estate secured receivables held for sale	351		509		860
Total	$	21,997	$	1,533	$	23,530


⁽¹⁾	The receivable balances included in this table reflect the current carrying amount of the loan excluding certain basis adjustments to the loan such as deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased receivables.


⁽²⁾	At March 31, 2015 and December 31, 2014, nonaccrual real estate secured receivables held for investment include $298 million and $417 million, respectively, of receivables that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.


⁽³⁾	At March 31, 2015 and December 31, 2014, nonaccrual real estate secured receivables held for investment include $571 million and $739 million, respectively, of TDR Loans, some of which may also be carried at fair value of the collateral less cost to sell.


⁽⁴⁾	Nonaccrual loans do not include receivables totaling $682 million and $627 million at March 31, 2015 and December 31, 2014, respectively, which have been written down to the lower of amortized cost or fair value of the collateral less cost to sell which are less than 90 days contractually delinquent and not accruing interest.

Troubled debt restructurings See discussion of TDR Loans above for further details on this credit quality indicator.