JP Morgan Chase 2014 Annual Report Download - page 248

Notes to consolidated financial statements
246 JPMorgan Chase & Co./2014 Annual Report
Impaired loans
The table below sets forth information about the Firm’s residential real estate impaired loans, excluding PCI loans. These loans
are considered to be impaired as they have been modified in a TDR. All impaired loans are evaluated for an asset-specific
allowance as described in Note 15.
Home equity Mortgages Total residential
real estate
– excluding PCI
December 31,
(in millions)
Senior lien Junior lien Prime, including option ARMs Subprime
2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
Impaired loans
With an allowance $ 552 $ 567 $ 722 $ 727 $ 4,949 $ 5,871 $ 2,239 $ 2,989 $ 8,462 $ 10,154
Without an allowance(a) 549 579 582 592 1,196 1,133 639 709 2,966 3,013
Total impaired loans(b)(c) $ 1,101 $ 1,146 $ 1,304 $ 1,319 $ 6,145 $ 7,004 $ 2,878 $ 3,698 $ 11,428 $ 13,167
Allowance for loan losses
related to impaired loans $ 84 $ 94 $ 147 $ 162 $ 127 $ 144 $ 64 $ 94 $ 422 $ 494
Unpaid principal balance of
impaired loans(d) 1,451 1,515 2,603 2,625 7,813 8,990 4,200 5,461 16,067 18,591
Impaired loans on
nonaccrual status(e) 628 641 632 666 1,559 1,737 931 1,127 3,750 4,171
(a) Represents collateral-dependent residential mortgage loans that are charged off to the fair value of the underlying collateral less cost to sell. The Firm reports, in
accordance with regulatory guidance, residential real estate loans that have been discharged under Chapter 7 bankruptcy and not reaffirmed by the borrower
(“Chapter 7 loans”) as collateral-dependent nonaccrual TDRs, regardless of their delinquency status. At December 31, 2014, Chapter 7 residential real estate loans
included approximately 19% of senior lien home equity, 12% of junior lien home equity, 25% of prime mortgages, including option ARMs, and 18% of subprime
mortgages that were 30 days or more past due.
(b) At December 31, 2014 and 2013, $4.9 billion and $7.6 billion, respectively, of loans modified subsequent to repurchase from Government National Mortgage
Association (“Ginnie Mae”) in accordance with the standards of the appropriate government agency (i.e., FHA, VA, RHS) are not included in the table above. When
such loans perform subsequent to modification in accordance with Ginnie Mae guidelines, they are generally sold back into Ginnie Mae loan pools. Modified loans
that do not re-perform become subject to foreclosure.
(c) Predominantly all residential real estate impaired loans, excluding PCI loans, are in the U.S.
(d) Represents the contractual amount of principal owed at December 31, 2014 and 2013. The unpaid principal balance differs from the impaired loan balances due to
various factors, including charge-offs, net deferred loan fees or costs; and unamortized discounts or premiums on purchased loans.
(e) As of December 31, 2014 and 2013, nonaccrual loans included $2.9 billion and $3.0 billion, respectively, of TDRs for which the borrowers were less than 90 days
past due. For additional information about loans modified in a TDR that are on nonaccrual status refer to the Loan accounting framework on pages 238–240 of this
Note.
The following table presents average impaired loans and the related interest income reported by the Firm.
Year ended December 31, Average impaired loans Interest income on impaired loans(a)
Interest income on impaired
loans on a cash basis(a)
(in millions) 2014 2013 2012 2014 2013 2012 2014 2013 2012
Home equity
Senior lien $ 1,122 $ 1,151 $ 610 $ 55 $ 59 $ 27 $ 37 $ 40 $ 12
Junior lien 1,313 1,297 848 82 82 42 53 55 16
Mortgages
Prime, including option ARMs 6,730 7,214 5,989 262 280 238 54 59 28
Subprime 3,444 3,798 3,494 182 200 183 51 55 31
Total residential real estate – excluding PCI $ 12,609 $ 13,460 $ 10,941 $ 581 $ 621 $ 490 $ 195 $ 209 $ 87
(a) Generally, interest income on loans modified in TDRs is recognized on a cash basis until such time as the borrower has made a minimum of six payments under the
new terms.