Wells Fargo 2013 Annual Report Download - page 177

TROUBLED DEBT RESTRUCTURINGS (TDRs) When, for
economic or legal reasons related to a borrower’s financial
difficulties, we grant a concession for other than an insignificant
period of time to a borrower that we would not otherwise
consider, the related loan is classified as a TDR. We do not
consider any loans modified through a loan resolution such as
foreclosure or short sale to be a TDR.
We may require some borrowers experiencing financial
difficulty to make trial payments generally for a period of three
to four months, according to the terms of a planned permanent
modification, to determine if they can perform according to
those terms. These arrangements represent trial modifications,
which we classify and account for as TDRs. 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; however, the exact concession type and resulting
financial effect are usually not finalized and do not take effect
until the loan is permanently modified. 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, 2013, the loans in trial modification period
were $253 million under HAMP, $45 million under 2MP and
$352 million under proprietary programs, compared with
$402 million, $45 million and $258 million at
December 31, 2012, respectively. Trial modifications with a
recorded investment of $286 million at December 31, 2013, and
$276 million at December 31, 2012, were accruing loans and
$364 million and $429 million, respectively, were nonaccruing
loans. Our 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. Our allowance process considers the
impact of those modifications that are probable to occur.
The following table summarizes our TDR modifications for
the periods presented by primary modification type and includes
the financial effects of these modifications. For those loans that
modify more than once, the table reflects each modification that
occurred during the period.
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