JP Morgan Chase 2015 Annual Report Download - page 322

Glossary of Terms
312 JPMorgan Chase & Co./2015 Annual Report
Group of Seven (“G7”) nations: Countries in the G7 are
Canada, France, Germany, Italy, Japan, the U.K. and the U.S.
G7 government bonds: Bonds issued by the government of
one of the G7 nations.
Headcount-related expense: Includes salary and benefits
(excluding performance-based incentives), and other
noncompensation costs related to employees.
Home equity – senior lien: Represents loans and
commitments where JPMorgan Chase holds the first
security interest on the property.
Home equity – junior lien: Represents loans and
commitments where JPMorgan Chase holds a security
interest that is subordinate in rank to other liens.
Impaired loan: Impaired loans are loans measured at
amortized cost, for which it is probable that the Firm will be
unable to collect all amounts due, including principal and
interest, according to the contractual terms of the
agreement. Impaired loans include the following:
• All wholesale nonaccrual loans
• All TDRs (both wholesale and consumer), including ones
that have returned to accrual status
Interchange income: A fee paid to a credit card issuer in
the clearing and settlement of a sales or cash advance
transaction.
Investment-grade: An indication of credit quality based on
JPMorgan Chase’s internal risk assessment system.
“Investment grade” generally represents a risk profile
similar to a rating of a “BBB-”/“Baa3” or better, as defined
by independent rating agencies.
LLC: Limited Liability Company.
Loan-to-value (“LTV”) ratio: For residential real estate
loans, the relationship, expressed as a percentage, between
the principal amount of a loan and the appraised value of
the collateral (i.e., residential real estate) securing the loan.
Origination date LTV ratio
The LTV ratio at the origination date of the loan. Origination
date LTV ratios are calculated based on the actual appraised
values of collateral (i.e., loan-level data) at the origination
date.
Current estimated LTV ratio
An estimate of the LTV as of a certain date. The current
estimated LTV ratios are calculated using estimated
collateral values derived from a nationally recognized home
price index measured at the metropolitan statistical area
(“MSA”) level. These MSA-level home price indices consist of
actual data to the extent available and forecasted data
where actual data is not available. As a result, the estimated
collateral values used to calculate these ratios do not
represent actual appraised loan-level collateral values; as
such, the resulting LTV ratios are necessarily imprecise and
should therefore be viewed as estimates.
Combined LTV ratio
The LTV ratio considering all available lien positions, as well
as unused lines, related to the property. Combined LTV
ratios are used for junior lien home equity products.
Managed basis: A non-GAAP presentation of financial
results that includes reclassifications to present revenue on
a fully taxable-equivalent basis. Management uses this non-
GAAP financial measure at the segment level, because it
believes this provides information to enable investors to
understand the underlying operational performance and
trends of the particular business segment and facilitates a
comparison of the business segment with the performance
of competitors.
Master netting agreement: An agreement between two
counterparties who have multiple contracts with each other
that provides for the net settlement of all contracts, as well
as cash collateral, through a single payment, in a single
currency, in the event of default on or termination of any
one contract.
Mortgage origination channels:
Retail – Borrowers who buy or refinance a home through
direct contact with a mortgage banker employed by the
Firm using a branch office, the Internet or by phone.
Borrowers are frequently referred to a mortgage banker by
a banker in a Chase branch, real estate brokers, home
builders or other third parties.
Correspondent – Banks, thrifts, other mortgage banks and
other financial institutions that sell closed loans to the Firm.
Mortgage product types:
Alt-A
Alt-A loans are generally higher in credit quality than
subprime loans but have characteristics that would
disqualify the borrower from a traditional prime loan. Alt-A
lending characteristics may include one or more of the
following: (i) limited documentation; (ii) a high combined
loan-to-value (“CLTV”) ratio; (iii) loans secured by non-
owner occupied properties; or (iv) a debt-to-income ratio
above normal limits. A substantial proportion of the Firm’s
Alt-A loans are those where a borrower does not provide
complete documentation of his or her assets or the amount
or source of his or her income.
Option ARMs
The option ARM real estate loan product is an adjustable-
rate mortgage loan that provides the borrower with the
option each month to make a fully amortizing, interest-only
or minimum payment. The minimum payment on an option
ARM loan is based on the interest rate charged during the
introductory period. This introductory rate is usually
significantly below the fully indexed rate. The fully indexed
rate is calculated using an index rate plus a margin. Once
the introductory period ends, the contractual interest rate
charged on the loan increases to the fully indexed rate and
adjusts monthly to reflect movements in the index. The
minimum payment is typically insufficient to cover interest
accrued in the prior month, and any unpaid interest is