Wells Fargo 2015 Annual Report Download - page 176

Note 6: Loans and Allowance for Credit Losses (continued)
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 consumer 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 Home 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, 2015, the loans in trial modification period
were $130 million under HAMP, $32 million under 2MP and
$240 million under proprietary programs, compared with
$149 million, $34 million and $269 million at December 31,
2014, respectively. Trial modifications with a recorded
investment of $136 million at December 31, 2015, and
$167 million at December 31, 2014, were accruing loans and
$266 million and $285 million, respectively, were nonaccruing
loans. Our experience is that substantially all 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.
Table 6.17 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. Loans that both modify and pay off
within the period, as well as changes in recorded investment
during the period for loans modified in prior periods, are not
included in the table.
Wells Fargo & Company
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