FINANCE RECEIVABLES

We segment our North America and International portfolio of finance receivables into "consumer" and "non-consumer" receivables. The receivables are secured by the vehicles, inventory, or other property being financed.

Consumer Segment. Receivables in this portfolio segment relate to products offered to individuals and businesses that finance the acquisition of Ford vehicles from dealers for personal and commercial use. The products include:


•	Retail financing – retail installment contracts for new and used vehicles


•	Direct financing leases – direct financing leases with retail customers, government entities, daily rental companies, and fleet customers

Non-Consumer Segment. Receivables in this portfolio segment relate to products offered to automotive dealers and purchased receivables. The products include:


•	Wholesale financing – loans to dealers to finance the purchase of vehicle inventory, also known as floorplan financing


•	Dealer loans – loans to dealers to finance working capital, and to finance the purchase of dealership real estate and/or make improvements to dealership facilities


•	Other financing – purchased receivables from Ford and its affiliates, primarily related to the sale of parts and accessories to dealers

Notes and accounts receivable from affiliated companies are presented separately on the balance sheet. These receivables are based on intercompany relationships and the balances are settled regularly. We do not assess these receivables for potential credit losses, nor are they subjected to aging analysis, credit quality reviews, or other formal assessments. As a result, Notes and accounts receivable from affiliated companies are not subject to the following disclosures contained herein.

Adoption of New Accounting Standard

Troubled Debt Restructurings. On July 1, 2011, we adopted the new accounting standard related to a creditor's determination of whether a restructuring is a troubled debt restructuring ("TDR"). The new standard provides additional guidance as to whether a restructuring meets the criteria to be considered a TDR.

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2. FINANCE RECEIVABLES (Continued)

Finance Receivables, Net

Finance receivables, net were as follows (in millions):



	September 30, 2011									December 31, 2010
	North America			International			Total Finance Receivables			North America			International			Total Finance Receivables
Consumer
Retail, gross	$	38,179		$	8,567		$	46,746		$	39,129		$	9,124		$	48,253
Less: Unearned interest supplements (a)	(1,482		)	(248		)	(1,730		)	(1,580		)	(285		)	(1,865		)
Retail	36,697			8,319			45,016			37,549			8,839			46,388
Direct financing leases, gross	4			1,098			1,102			17			1,449			1,466
Less: Unearned interest supplements (a)	—			(19		)	(19		)	—			(16		)	(16		)
Direct financing leases	4			1,079			1,083			17			1,433			1,450
Consumer finance receivables (b)	$	36,701		$	9,398		$	46,099		$	37,566		$	10,272		$	47,838

Non-Consumer
Wholesale	$	13,539		$	8,350		$	21,889		$	13,273		$	8,663		$	21,936
Dealer loans	1,025			65			1,090			1,117			57			1,174
Other (c)	766			419			1,185			738			383			1,121
Non-Consumer finance receivables (b)(d)	15,330			8,834			24,164			15,128			9,103			24,231
Total recorded investment	$	52,031		$	18,232		$	70,263		$	52,694		$	19,375		$	72,069

Recorded investment in finance receivables	$	52,031		$	18,232		$	70,263		$	52,694		$	19,375		$	72,069
Less: Allowance for credit losses (e)	(440		)	(107		)	(547		)	(625		)	(142		)	(767		)
Finance receivables, net (f)	$	51,591		$	18,125		$	69,716		$	52,069		$	19,233		$	71,302

Net finance receivables subject to fair value (g)							$	68,624								$	69,830
Fair value							70,257									71,547


(a)	Ford-sponsored special-rate financing attributable to retail contracts and direct financing leases.

(b)

At September 30, 2011 and December 31, 2010, includes North America consumer receivables of $28.2 billion and $28.7 billion and non-consumer receivables of $12.2 billion and $12.8 billion, respectively, and International consumer receivables of $6.5 billion and $7.1 billion and non-consumer receivables of $6.0 billion and $5.9 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be included in our consolidated financial statements, of which $25 million is reported as inventory by Ford at September 30, 2011. The receivables are available only for payment of the debt and other obligations issued or arising in the securitization transactions; they are not available to pay our other obligations or the claims of our other creditors. We hold the right to the excess cash flows not needed to pay the debt and other obligations issued or arising in each of these securitization transactions. See Note 5 for additional information.


(c)	At September 30, 2011 and December 31, 2010, includes $583 million and $549 million, respectively, of other receivables purchased from certain divisions and affiliates of Ford in the U.S. where control is retained by the seller.

(d)

At September 30, 2011 and December 31, 2010, includes $58 million and $45 million, respectively, of North America wholesale receivables and $16 million and $24 million, respectively, of North America dealer loans with entities (primarily dealers) that are reported as consolidated subsidiaries of Ford. At September 30, 2011 and December 31, 2010, includes $369 million and $418 million, respectively, of International wholesale receivables with entities (primarily dealers) that are reported as consolidated subsidiaries of Ford. The associated vehicles that are being financed by us are reported as inventory on Ford's balance sheet.


(e)	At September 30, 2011 and December 31, 2010, includes $507 million and $701 million, respectively, of allowance for credit losses attributable to consumer receivables and $40 million and $66 million, respectively, attributable to non-consumer receivables. See Note 4 for additional information related to our allowance for credit losses.


(f)	At September 30, 2011 and December 31, 2010, excludes $162 million and $176 million, respectively, of accrued uncollected interest receivables, which we report in Other assets on our balance sheet.


(g)	At September 30, 2011 and December 31, 2010, excludes $1.1 billion and $1.5 billion, respectively, of certain receivables (primarily direct financing leases) that are not subject to fair value disclosure requirements.

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2. FINANCE RECEIVABLES (Continued)

Aging. For all classes of finance receivables, we define "past due" as any payment, including principal and interest, that has not been collected and is at least 31 days past the contractual due date. The aging analysis of our finance receivables balances at September 30, 2011 was as follows (in millions):



	31-60 Days Past Due		61-90 Days Past Due		91-120 Days Past Due		Greater Than 120 Days		Total Past Due		Current		Total Finance Receivables
North America
Consumer
Retail	$	651	$	67	$	25	$	73	$	816	$	35,881	$	36,697
Direct financing leases	0		0		0		0		0		4		4
Non-Consumer
Wholesale	—		1		—		2		3		13,536		13,539
Dealer loans	—		0		1		8		9		1,016		1,025
Other	—		—		—		—		—		766		766
Sub-total	651		68		26		83		828		51,203		52,031

International
Consumer
Retail	$	55	$	27	$	14	$	44	$	140	$	8,179	$	8,319
Direct financing leases	7		3		2		4		16		1,063		1,079
Non-Consumer
Wholesale	1		0		0		16		17		8,333		8,350
Dealer loans	—		—		—		1		1		64		65
Other	—		—		—		—		—		419		419
Sub-total	63		30		16		65		174		18,058		18,232
Total recorded investment	$	714	$	98	$	42	$	148	$	1,002	$	69,261	$	70,263

Credit Quality

Consumer. When originating all classes of consumer receivables, we use a proprietary scoring system that measures the credit quality of the receivables using several factors such as credit bureau information, consumer credit risk scores (e.g., FICO score), customer characteristics, and contract characteristics. In addition to our proprietary scoring system, we consider other individual consumer factors such as employment history, financial stability and capacity to pay.

Subsequent to origination, we review the credit quality of our retail and direct financing lease receivables based on customer payment activity. As each customer develops a payment history, we use an internally developed behavioral scoring model to assist in determining the best collection strategies. Based on data from this scoring model, contracts are categorized by collection risk. Our collection models evaluate several factors including origination characteristics, updated credit bureau data, and payment patterns. These models allow for more focused collection activity on higher-risk accounts and are used to refine our risk-based staffing model to ensure collection resources are aligned with portfolio risk.

Credit quality ratings for our consumer receivables are categorized as follows:


•	Pass – receivables that are current to 60 days past due


•	Special Mention – receivables 61 to 120 days past due and in intensified collection status


•	Substandard – receivables greater than 120 days past due and for which the uncollectible portion of the receivables has already been charged-off, as measured using the fair value of the collateral

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2. FINANCE RECEIVABLES (Continued)

The credit quality analysis of our consumer receivables portfolio was as follows (in millions):



	September 30, 2011				December 31, 2010
	Retail		Direct Financing Leases		Retail		Direct Financing Leases
North America
Pass	$	36,532	$	4	$	37,348	$	17
Special Mention	92		0		119		0
Substandard	73		0		82		0
Sub-total	36,697		4		37,549		17

International
Pass	8,234		1,070		8,762		1,423
Special Mention	41		5		58		7
Substandard	44		4		19		3
Sub-total	8,319		1,079		8,839		1,433
Total recorded investment	$	45,016	$	1,083	$	46,388	$	1,450

Non-Consumer. For all classes of non-consumer receivables, we extend commercial credit to dealers primarily in the form of approved lines of credit to purchase new Ford and Lincoln vehicles as well as used vehicles. Each commercial lending request is evaluated taking into consideration the borrower's financial condition and the underlying collateral securing the loan. We use a proprietary model to assign each dealer a risk rating. This model uses historical performance data to identify key factors about a dealer that we consider significant in predicting a dealer's ability to meet its financial obligations. We also consider numerous other financial and qualitative factors including capitalization and leverage, liquidity and cash flow, profitability, and credit history with Ford Credit and other creditors. A dealer's risk rating does not reflect any guarantees or a dealer owner's net worth.

Dealers are assigned to one of four groups according to risk ratings as follows:


•	Group I – Dealers with strong to superior financial metrics


•	Group II – Dealers with fair to favorable financial metrics


•	Group III – Dealers with marginal to weak financial metrics


•	Group IV – Dealers with poor financial metrics, including dealers classified as uncollectible

We suspend credit lines and extend no further funding to dealers classified in Group IV.

We regularly review our model to confirm the continued business significance and statistical predictability of the factors and update the model to incorporate new factors or other information that improves its statistical predictability. In addition, we verify the existence of the assets collateralizing the receivables by physical audits of vehicle inventories, which are performed with increased frequency for higher-risk (i.e., Group III and Group IV) dealers. We perform a credit review of each dealer at least annually and adjust the dealer's risk rating, if necessary.

Performance of our non-consumer receivables is evaluated based on our internal dealer risk rating analysis, as payment for wholesale receivables generally is not required until the dealer has sold the vehicle inventory. Wholesale and dealer loan receivables with the same dealer customer share the same risk rating.

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2. FINANCE RECEIVABLES (Continued)

The credit quality analysis of our wholesale and dealer loan receivables was as follows (in millions):



	September 30, 2011				December 31, 2010
	Wholesale		Dealer Loan		Wholesale		Dealer Loan
North America
Group I	$	11,034	$	795	$	10,540	$	785
Group II	2,166		138		2,372		208
Group III	335		85		353		107
Group IV	4		7		8		17
Sub-total	13,539		1,025		13,273		1,117

International
Group I	5,182		43		5,270		29
Group II	1,949		10		1,939		15
Group III	1,212		11		1,454		12
Group IV	7		1		0		1
Sub-total	8,350		65		8,663		57
Total recorded investment	$	21,889	$	1,090	$	21,936	$	1,174

Other non-consumer receivables consist primarily of purchased receivables from Ford that are excluded from our credit quality reporting since the performance of this group of receivables is generally guaranteed by Ford.

Non-Accrual Status

The accrual of revenue is discontinued at the earlier of the time a receivable is determined to be uncollectible, bankruptcy status notification, or 120 days past due. Finance receivable accounts may be restored to accrual status only when a customer settles all past-due deficiency balances and future payments are reasonably assured. For receivables in non-accrual status, subsequent financing revenue is recognized only to the extent a payment is received. Payments are generally applied first to outstanding interest and then to the unpaid principal balance.

The recorded investment of consumer receivables in non-accrual status was $433 million or 0.9% of our consumer receivables as of September 30, 2011 and $486 million or 1% of our consumer receivables as of December 31, 2010.

The recorded investment of non-consumer receivables in non-accrual status was $65 million, or 0.3% of our non-consumer receivables, as of September 30, 2011 and $101 million, or 0.4% of our non-consumer receivables, as of December 31, 2010.

Finance receivables greater than 90 days past due and still accruing interest at September 30, 2011 and December 31, 2010 reflect $18 million and $7 million, respectively, of non-bankrupt retail accounts in the 91 – 120 days past-due category that are in the process of collection and $2 million and $1 million, respectively, of dealer loans.

Impaired Receivables

Consumer. Finance receivables are evaluated both collectively and specifically for impairment. Impaired consumer receivables represent accounts that have been re-written or modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code and are considered to be TDRs, as well as all accounts greater than 120 days past due. The recorded investment of consumer receivables that were impaired as of September 30, 2011 and December 31, 2010 was $352 million, or 0.8% of consumer receivables and $104 million, or 0.2% of consumer receivables, respectively.

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2. FINANCE RECEIVABLES (Continued)

Non-Consumer. Impaired non-consumer receivables represent accounts with dealers that have weak or poor financial metrics or dealer loans that have been modified in TDRs. The following factors (not necessarily in order of importance or probability of occurrence) are considered in determining whether a non-consumer receivable is impaired:


•	Delinquency in contractual payments of principal or interest


•	Deterioration of the borrower's competitive position


•	Cash flow difficulties experienced by the borrower


•	Breach of loan covenants or conditions


•	Initiation of dealer bankruptcy or other insolvency proceedings


•	Fraud or criminal conviction

The recorded investment of non-consumer receivables that were impaired as of September 30, 2011 and December 31, 2010 was $68 million, or 0.3% of non-consumer receivables and $101 million, or 0.4% of non-consumer receivables, respectively.

See Note 4 for additional information related to the development of our allowance for credit losses.

Troubled Debt Restructurings

We have applied the requirements of the new accounting standard related to TDRs to restructurings occurring on or after January 1, 2011. Evaluation under the new guidance resulted in consumer finance receivables that are now considered TDRs.

A restructuring of debt constitutes a TDR if we grant a concession to a borrower for economic or legal reasons related to the debtor's financial difficulties that we would not otherwise consider.

Consumer. While payment extensions are granted on consumer receivables in the normal course of the collection process, no concessions are made on the principal balance loaned or the interest rate charged. Payment extensions typically result in a short-term deferral of the borrower's normal monthly payment and do not constitute TDRs.

Consumer receivable contracts may be modified to lower the customer's payment by extending the term of the contract or lowering the interest rate as a remedy to avoid or cure delinquency. We do not grant concessions on the principal balance for re-written contracts. Contracts that have a modified interest rate that is below the market rate are considered to be TDRs.

Consumer receivables modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code are considered to be TDRs. We do not record changes to the recorded investment per the original contract for these TDRs until all payments and requirements of the reorganization plan are met.

The outstanding recorded investment at time of modification for consumer receivables that are considered to be TDRs was $297 million, or 0.6% of our consumer receivables as of September 30, 2011. A subsequent default occurs when contracts that were previously modified in TDRs within the last twelve months subsequently and had past due payments that resulted in repossession or charge-off. The subsequent default rate for consumer contracts was 2.8% of TDRs. We had no consumer receivables considered to be TDRs as of December 31, 2010.

Consumer receivables involved in TDRs are specifically assessed for impairment. A specific allowance is estimated based on the present value of the expected future cash flows of the receivable discounted at the loan's original effective interest rate or the fair value of any collateral adjusted for estimated costs to sell. The allowance for credit losses related to consumer TDRs was $13 million as of September 30, 2011.

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2. FINANCE RECEIVABLES (Continued)

Non-Consumer. Within our non-consumer receivables segment, only dealer loans subject to forbearance, moratoriums, extension agreements, or other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral constitute TDRs. We do not grant concessions on the principal balance of dealer loans. The outstanding recorded investment of dealer loans involved in TDRs is $13 million, or 0.05% of our non-consumer receivables as of September 30, 2011 and December 31, 2010. A subsequent default occurs when receivables that were previously modified in TDRs within the last twelve months and subsequently had past due payments that resulted in foreclosure or charge-off. The subsequent default rate for non-consumer contracts for the periods ending September 30, 2011 and December 31, 2010 was 33% and 17%, respectively.

Dealer loans involved in TDRs are assessed for impairment and included in our allowance for credit losses based on either the present value of the expected future cash flows of the receivable discounted at the loan's original effective interest rate, or the fair value of the collateral adjusted for estimated costs to sell. For loans where foreclosure is probable, the fair value of the collateral is used to estimate the specific impairment. An impairment charge is recorded as part of the provision to the allowance for credit losses for the amount by which the recorded investment of the receivable exceeds its estimated fair value.

See Note 4 for additional information related to the development of our allowance for credit losses.