PNC Bank 2012 Annual Report Download - page 110

consist of first and second liens, the charge-off amounts for
the pool are proportionate to the composition of first and
second liens in the pool. Our experience has been that the ratio
of first to second lien loans has been consistent over time and
is appropriately represented in our pools used for roll-rate
calculations.
Generally, our variable-rate home equity lines of credit have
either a seven or ten year draw period, followed by a 20 year
amortization term. During the draw period, we have home
equity lines of credit where borrowers pay interest only and
home equity lines of credit where borrowers pay principal and
interest. Based upon outstanding balances at December 31,
2012, the following table presents the periods when home
equity lines of credit draw periods are scheduled to end.
Table 39: Home Equity Lines of Credit – Draw Period End
Dates
In millions
Interest
Only
Product
Principal
and
Interest
Product
2013 $ 1,338 $ 221
2014 2,048 475
2015 2,024 654
2016 1,571 504
2017 3,075 697
2018 and thereafter 5,497 4,825
Total (a) $15,553 $7,376
(a) Includes approximately $166 million, $208 million, $213 million, $61 million, $70
million and $526 million of home equity lines of credit with balloon payments with
draw periods scheduled to end in 2013, 2014, 2015, 2016, 2017 and 2018 and
thereafter, respectively.
We view home equity lines of credit where borrowers are
paying principal and interest under the draw period as less
risky than those where the borrowers are paying interest only,
as these borrowers have a demonstrated ability to make some
level of principal and interest payments.
Based upon outstanding balances, and excluding purchased
impaired loans, at December 31, 2012, for home equity lines
of credit for which the borrower can no longer draw (e.g.,
draw period has ended or borrowing privileges have been
terminated), approximately 3.86% were 30-89 days past due
and approximately 5.96% were greater than or equal to 90
days past due. Generally, when a borrower becomes 60 days
past due, we terminate borrowing privileges, and those
privileges are not subsequently reinstated. At that point, we
continue our collection/recovery processes, which may
include a loss mitigation loan modification resulting in a loan
that is classified as a TDR.
See Note 5 Asset Quality in the Notes To Consolidated
Financial Statements in Item 8 of this Report for additional
information.
L
OAN M ODIFICATIONS AND T ROUBLED D EBT
R ESTRUCTURINGS
Consumer Loan Modifications
We modify loans under government and PNC-developed
programs based upon our commitment to help eligible
homeowners and borrowers avoid foreclosure, where
appropriate. Initially, a borrower is evaluated for a
modification under a government program. If a borrower does
not qualify under a government program, the borrower is then
evaluated under a PNC program. Our programs utilize both
temporary and permanent modifications and typically reduce
the interest rate, extend the term and/or defer principal.
Temporary and permanent modifications under programs
involving a change to loan terms are generally classified as
TDRs. Further, certain payment plans and trial payment
arrangements which do not include a contractual change to
loan terms may be classified as TDRs. Additional detail on
TDRs is discussed below as well as in Note 5 Asset Quality in
the Notes To Consolidated Financial Statements in Item 8 of
this Report.
A temporary modification, with a term between three and 60
months, involves a change in original loan terms for a period of
time and reverts to a calculated exit rate for the remaining term
of the loan as of a specific date. A permanent modification, with
a term greater than 60 months, is a modification in which the
terms of the original loan are changed. Permanent modifications
primarily include the government-created Home Affordable
Modification Program (HAMP) or PNC-developed HAMP-like
modification programs.
For consumer loan programs, such as residential mortgages and
home equity loans and lines, we will enter into a temporary
modification when the borrower has indicated a temporary
hardship and a willingness to bring current the delinquent loan
balance. Examples of this situation often include delinquency
due to illness or death in the family, or a loss of employment.
Permanent modifications are entered into when it is confirmed
that the borrower does not possess the income necessary to
continue making loan payments at the current amount, but our
expectation is that payments at lower amounts can be made.
Residential mortgage and home equity loans and lines have
been modified with changes in terms for up to 60 months,
although the majority involve periods of three to 24 months.
We also monitor the success rates and delinquency status of our
loan modification programs to assess their effectiveness in
serving our customers’ needs while mitigating credit losses. The
following tables provide the number of accounts and unpaid
principal balance of modified consumer real estate related loans
as well as the number of accounts and unpaid principal balance
of modified loans that were 60 days or more past due as of six
months, nine months, twelve months and fifteen months after
the modification date.
The PNC Financial Services Group, Inc. – Form 10-K 91