Morgan Stanley 2014 Annual Report Download - page 227

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At December 31, 2013
Residential
Mortgage
Unconsolidated
SPEs
Residential
Mortgage
Consolidated
SPEs
Commercial
Mortgage
Unconsolidated
SPEs
(dollars in millions)
Assets serviced (unpaid principal balance) ..................... $785 $775 $4,114
Amounts past due 90 days or greater (unpaid principal
balance)(1) ........................................... $ 66 $ 44 $ —
Percentage of amounts past due 90 days or greater(1) ............ 8.5% 5.6% —
Credit losses ............................................ $ 1 $ 17 $ —
(1) Amounts include loans that are at least 90 days contractually delinquent, loans for which the borrower has filed for bankruptcy, loans in
foreclosure and real estate owned.
8. Loans and Allowance for Loan Losses.
Loans.
The Company’s loans held for investment are recorded at amortized cost, and its loans held for sale are recorded
at lower of cost or fair value in the Company’s consolidated statements of financial condition.
• Corporate. Corporate loans primarily include commercial and industrial lending used for general
corporate purposes, working capital and liquidity, “event-driven” loans and asset-backed lending
products. “Event-driven” loans support client merger, acquisition or recapitalization activities. Corporate
lending is structured as revolving lines of credit, letter of credit facilities, term loans and bridge loans.
Risk factors considered in determining the allowance for corporate loans include the borrower’s financial
strength, seniority of the loan, collateral type, volatility of collateral value, debt cushion, covenants and
counterparty type.
• Consumer. Consumer loans include unsecured loans and securities-based lending that allows clients to
borrow money against the value of qualifying securities for any suitable purpose other than purchasing,
trading, or carrying securities or refinancing margin debt. The majority of consumer loans are structured
as revolving lines of credit and letter of credit facilities and are primarily offered through the Company’s
Portfolio Loan Account (“PLA”) program. The allowance methodology for unsecured loans considers the
specific attributes of the loan as well as the borrower’s source of repayment. The allowance methodology
for securities-based lending considers the collateral type underlying the loan (e.g., diversified securities,
concentrated securities or restricted stock).
• Residential Real Estate. Residential real estate loans mainly include non-conforming loans and home
equity lines of credit. The allowance methodology for non-conforming residential mortgage loans
considers several factors, including, but not limited to, loan-to-value ratio, FICO score, home price index,
and delinquency status. The methodology for home equity lines of credit considers credit limits and
utilization rates in addition to the factors considered for non-conforming residential mortgages.
• Wholesale Real Estate. Wholesale real estate loans include owner-occupied loans and income-
producing loans. The principal risk factors for determining the allowance for wholesale real estate loans
are the underlying collateral type, loan-to-value ratio and debt service ratio.
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