Wells Fargo 2013 Annual Report Download - page 75

Our nonaccrual policies are generally the same for all loan
types when a restructuring is involved. We re-underwrite loans
at the time of restructuring to determine whether there is
sufficient evidence of sustained repayment capacity based on the
borrower’s documented income, debt to income ratios, and other
factors. Loans lacking sufficient evidence of sustained repayment
capacity at the time of modification are charged down to the fair
value of the collateral, if applicable. For an accruing loan that
has been modified, if the borrower has demonstrated
performance under the previous terms and the underwriting
process shows the capacity to continue to perform under the
restructured terms, the loan will generally remain in accruing
status. Otherwise, the loan will be placed in nonaccrual status
until the borrower demonstrates a sustained period of
performance, generally six consecutive months of payments, or
equivalent, inclusive of consecutive payments made prior to
modification. Loans will also be placed on nonaccrual, and a
corresponding charge-off is recorded to the loan balance, when
we believe that principal and interest contractually due under
the modified agreement will not be collectible.
Table 35 provides an analysis of the changes in TDRs. Loans
that may be modified more than once are reported as TDR
inflows only in the period they are first modified. Other than
resolutions such as foreclosures, sales and transfers to held for
sale, we may remove loans held for investment from TDR
classification, but only if they have been refinanced or
restructured at market terms and qualify as a new loan.
Table 35: Analysis of Changes in TDRs
Quarter ended
Year ended Dec. 31,
(in millions)
Dec. 31,
2013
Sept. 30,
2013
June 30,
2013
Mar. 31,
2013 2013 2012
Commercial TDRs
Balance, beginning of period $ 4,219 4,551 4,818 5,146 5,146 5,349
Inflows 292 534 468 500 1,794 2,559
Outflows
Charge-offs (44) (24) (24) (40) (132) (381)
Foreclosure (16) (16) (26) (30) (88) (60)
Payments, sales and other (1) (686) (826) (685) (758) (2,955) (2,321)
Balance, end of period 3,765 4,219 4,551 4,818 3,765 5,146
Consumer TDRs
Balance, beginning of period 22,789 22,969 22,889 21,768 21,768 17,308
Inflows 1,248 1,282 1,352 2,076 5,958 8,050
Outflows
Charge-offs (2) (155) (183) (241) (280) (859) (1,400)
Foreclosure (417) (519) (240) (114) (1,290) (426)
Payments, sales and other (1) (701) (761) (785) (579) (2,826) (1,818)
Net change in trial modifications (3) (68) 1 (6) 18 (55) 54
Balance, end of period 22,696 22,789 22,969 22,889 22,696 21,768
Total TDRs $ 26,461 27,008 27,520 27,707 26,461 26,914
(1) Other outflows include normal amortization/accretion of loan basis adjustments and loans transferred to held-for-sale. It also includes $29 million, $40 million and
$15 million of loans refinanced or restructured as new loans and removed from TDR classification for the quarters ended September 30, June 30, and March 31, 2013,
respectively. No loans were removed from TDR classification in 2012 as a result of being refinanced or restructured as new loans.
(2) Year ended December 31, 2012 charge-offs reflect the impact of loans discharged in bankruptcy being reported as TDRs in accordance with the OCC guidance issued in
2012.
(3) Net change in trial modifications includes: inflows of new TDRs entering the trial payment period, net of outflows for modifications that either (i) successfully perform and
enter into a permanent modification, or (ii) did not successfully perform according to the terms of the trial period plan and are subsequently charged-off, foreclosed upon or
otherwise resolved. Our experience is that most of the mortgages that enter a trial payment period program are successful in completing the program requirements.
73