Wells Fargo 2011 Annual Report Download - page 156

Note 6: Loans and Allowance for Credit Losses (continued)
The previous table presents information on all loan
modifications classified as TDRs. We may require some
borrowers experiencing financial difficulty to make trial
payments generally for a period of three to four months,
according to terms of a planned permanent modification, to
determine if they can perform according to those terms. Based
on clarifying guidance from the SEC in December 2011, these
arrangements represent trial modifications, which we classify
and account for as TDRs. The trial period terms are developed in
accordance with our proprietary programs or the U.S. Treasury’s
Making Homes Affordable programs for real estate 1-4 family
first lien (i.e. Home Affordable Modification Program – HAMP)
and junior lien (i.e. Second Lien Modification Program – 2MP)
mortgage loans. At December 31, 2011, we had $421 million,
$46 million, and $184 million of loans in a trial modification
period under HAMP, 2MP, and proprietary programs,
respectively. While loans are in trial payment programs their
original terms are not considered modified and they continue to
advance through delinquency status and accrue interest
according to their original terms. The planned modifications for
these arrangements predominantly involve interest rate
reductions or other interest rate concessions. At
December 31, 2011, trial modifications with a recorded
investment of $310 million were accruing loans and $341 million
were nonaccruing loans. Our recent experience is that most of
the mortgages that enter a trial payment period program are
successful in completing the program requirements and are then
permanently modified at the end of the trial period. As
previously discussed, our allowance process considers the
impact of those modifications that are probable to occur
including the associated credit cost and related re-default risk.
The table below summarizes permanent modification TDRs
that have defaulted in the current period within 12 months of
their permanent modification date. We are reporting these
defaulted TDRs based on a payment default definition of 90 days
past due for the commercial portfolio segment and 60 days past
due for the consumer portfolio segment.
Year ended
December 31, 2011
Recorded
investment
(in millions)
of defaults
Commercial:
Commercial and industrial
$
216
Real estate mortgage
331
Real estate construction
69
Lease financing
1
Foreign
1
Total commercial
618
Consumer:
Real estate 1-4 family first mortgage
1,110
Real estate 1-4 family junior lien mortgage
137
Credit card
156
Other revolving credit and installment
113
Total consumer
1,516
Total
$
2,134
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