PNC Bank 2015 Annual Report Download - page 94

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 24 months, is a
modification in which the terms of the original loan are
changed. Permanent modification programs, including both
government-created Home Affordable Modification Program
(HAMP) and PNC-developed modification programs,
generally result in principal forgiveness, interest rate
reduction, term extension, capitalization of past due amounts,
interest only period or deferral of principal.
We also monitor the success rates and delinquency status of
our loan modification programs to assess their effectiveness in
serving our borrowers’ and servicing customers’ needs while
mitigating credit losses. Table 33 provides the number of
bank-owned accounts and unpaid principal balance of
modified consumer real estate related loans at the end of each
year presented.
Table 33: Consumer Real Estate Related Loan Modifications
December 31, 2015 December 31, 2014
Dollars in millions
Number of
Accounts
Unpaid
Principal
Balance
Number of
Accounts
Unpaid
Principal
Balance
Temporary modifications (a) 4,469 $ 337 5,346 $ 417
Permanent modifications
Home equity 15,268 1,088 13,128 968
Residential real estate 8,787 1,721 12,526 2,350
Total permanent modifications 24,055 2,809 25,654 3,318
Total consumer real estate related loan modifications 28,524 $3,146 31,000 $3,735
(a) All temporary modifications are home equity loans.
In addition to temporary loan modifications, we may make
available to a borrower a payment plan or a HAMP trial
payment period. Under a payment plan or a HAMP trial
payment period, there is no change to the loan’s contractual
terms so the borrower remains legally responsible for payment
of the loan under its original terms.
Payment plans may include extensions, re-ages and/or
forbearance plans. All payment plans bring an account current
once certain requirements are achieved and are primarily
intended to demonstrate a borrower’s renewed willingness and
ability to re-pay. Due to the short term nature of the payment
plan, there is a minimal impact to the ALLL.
Under a HAMP trial payment period, we establish an alternate
payment, generally at an amount less than the contractual
payment amount, for the borrower during this short time
period. This allows a borrower to demonstrate successful
payment performance before permanently restructuring the
loan into a HAMP modification. Subsequent to successful
borrower performance under the trial payment period, we will
capitalize the original contractual amount past due, to include
accrued interest and fees receivable, and restructure the loan’s
contractual terms, along with bringing the restructured
account current. As the borrower is often already delinquent at
the time of participation in the HAMP trial payment period,
generally enrollment in the program does not significantly
increase the ALLL. If the trial payment period is unsuccessful,
the loan will be evaluated for further action based upon our
existing policies.
Commercial Loan Modifications and Payment Plans
Modifications of terms for commercial loans are based on
individual facts and circumstances. Commercial loan
modifications may involve reduction of the interest rate,
extension of the loan term and/or forgiveness of principal.
Modified commercial loans are usually already nonperforming
prior to modification. We evaluate these modifications for
TDR classification based upon whether we granted a
concession to a borrower experiencing financial difficulties.
Additional detail on TDRs is discussed below as well as in
Note 3 Asset Quality in the Notes To Consolidated Financial
Statements in Item 8 of this Report.
We have established certain commercial loan modification
and payment programs for small business loans, Small
Business Administration loans, and investment real estate
loans. As of December 31, 2015 and December 31, 2014, $23
million and $34 million, respectively, in loan balances were
covered under these modification and payment plan programs.
Of these loan balances, $9 million and $12 million have been
determined to be TDRs as of December 31, 2015 and
December 31, 2014, respectively.
76 The PNC Financial Services Group, Inc. – Form 10-K