eTrade 2010 Annual Report Download - page 132

Credit Quality
The Company tracks and reviews factors to predict and monitor credit risk in its loan portfolio on an
ongoing basis. These factors include: loan type, estimated current LTV/CLTV ratios, documentation type,
borrowers’ current credit scores, housing prices, acquisition channel, loan vintage and geographic location of the
property. In economic conditions in which housing prices generally appreciate, the Company believes that loan
type, LTV/CLTV ratios, documentation type and credit scores are the key factors in determining future loan
performance. In a housing market with declining home prices and less credit available for refinance, the
Company believes the LTV/CLTV ratio becomes a more important factor in predicting and monitoring credit
risk. The factors are updated on at least a quarterly basis. The following tables show the distribution of the
Company’s one- to four-family and home equity loans, both of which make up the vast majority of the
Company’s loan portfolio, by credit quality indicator (dollars in thousands):
One- to Four-Family Home Equity
December 31, December 31,
Current LTV/CLTV(1) 2010 2009 2010 2009
<=70% $1,380,327 $ 2,095,290 $1,084,876 $1,379,617
70%-80% 852,906 1,148,169 400,029 507,589
80%-90% 1,168,293 1,464,159 575,924 705,576
90%-100% 1,161,238 1,500,907 727,006 885,873
>100% 3,607,565 4,358,604 3,622,476 4,291,056
Total mortgage loans receivable $8,170,329 $10,567,129 $6,410,311 $7,769,711
Average estimated current LTV/CLTV(2) 100.8% 97.3% 107.7% 106.0%
Average LTV/CLTV at loan origination(3) 70.6% 70.1% 79.3% 79.5%
(1) Current CLTV calculations for home equity loans are based on the maximum available line for home equity lines of credit and
outstanding principal balance for home equity installment loans. Current property values are updated on a quarterly basis using the most
recent property value data available to the Company. For properties in which the Company did not have an updated valuation, it utilized
home price indices to estimate the current property value.
(2) The average estimated current LTV ratio reflects the outstanding balance at the balance sheet date, divided by the estimated current
property value.
(3) Average LTV/CLTV at loan origination calculations are based on LTV/CLTV at time of purchase for one- to four-family purchased
loans and undrawn balances for home equity loans.
One- to Four-Family Home Equity
December 31, December 31,
Documentation Type 2010 2009 2010 2009
Full documentation $3,556,480 $ 5,708,645 $3,201,381 $3,735,672
Low/no documentation 4,613,849 4,858,484 3,208,930 4,034,039
Total mortgage loans receivable $8,170,329 $10,567,129 $6,410,311 $7,769,711
One- to Four-Family Home Equity
December 31, December 31,
Current FICO (1) 2010 2009 2010 2009
>=720 $4,438,443 $ 6,313,183 $3,101,814 $4,154,399
719 - 700 709,635 870,061 665,741 782,593
699 - 680 566,256 697,998 550,756 622,851
679 - 660 434,775 492,776 411,709 472,581
659 - 620 633,983 647,914 512,528 584,816
<620 1,387,237 1,545,197 1,167,763 1,152,471
Total mortgage loans receivable $8,170,329 $10,567,129 $6,410,311 $7,769,711
(1) FICO scores are updated on a quarterly basis; however, as of December 31, 2010 and 2009, there were some loans for which the updated
FICO scores were not available. The current FICO distribution as of December 31, 2010 included original FICO scores for
approximately $218 million and $168 million of one- to four-family and home equity loans, respectively. The current FICO distribution
as of December 31, 2009 included original FICO scores for approximately $365 million and $847 million of one- to four-family and
home equity loans, respectively.
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