US Bank 2012 Annual Report Download - page 43

balance sheet or sell the loans into the secondary market while
retaining the servicing rights and customer relationships.
Utilizing the secondary markets enables the Company to
effectively reduce its credit and other asset/liability risks. For
residential mortgages that are retained in the Company’s
portfolio and for home equity and second mortgages, credit
risk is also diversified by geography and managed by
adherence to LTV and borrower credit criteria during the
underwriting process.
The Company estimates updated LTV information
quarterly, based on a method that combines automated
valuation model updates and relevant home price indices.
LTV is the ratio of the loan’s outstanding principal balance to
the current estimate of property value. For home equity and
second mortgages, combined loan-to-value (“CLTV”) is the
combination of the first mortgage original principal balance
and the second lien outstanding principal balance, relative to
the current estimate of property value. Certain loans do not
have a LTV or CLTV, primarily due to lack of availability of
relevant automated valuation model and/or home price indices
values, or lack of necessary valuation data on acquired loans.
The following tables provide summary information for the
LTVs of residential mortgages and home equity and second
mortgages by borrower type at December 31, 2012:
Residential mortgages
(Dollars in Millions)
Interest
Only Amortizing Total
Percent
of Total
Prime Borrowers
Less than or equal to 80% .... $1,864 $25,786 $27,650 76.1%
Over 80% through 90% ....... 458 3,459 3,917 10.8
Over 90% through 100%...... 369 1,475 1,844 5.1
Over 100% .................... 925 1,877 2,802 7.7
No LTV available .............. – 116 116 .3
Total ........................ $3,616 $32,713 $36,329 100.0%
Sub-Prime Borrowers
Less than or equal to 80% .... $ 1 $ 544 $ 545 34.2%
Over 80% through 90% ....... 2 234 236 14.8
Over 90% through 100%...... 2 239 241 15.1
Over 100% .................... 8 563 571 35.9
No LTV available .............. – – – –
Total ........................ $ 13 $ 1,580 $ 1,593 100.0%
Other Borrowers
Less than or equal to 80% .... $ 9 $ 257 $ 266 32.3%
Over 80% through 90% ....... 3 176 179 21.8
Over 90% through 100%...... 3 103 106 12.9
Over 100% .................... 3 268 271 33.0
No LTV available .............. – – – –
Total ........................ $ 18 $ 804 $ 822 100.0%
Loans Purchased From GNMA
Mortgage Pools (a) ........... $ – $ 5,274 $ 5,274 100.0%
Total
Less than or equal to 80% .... $1,874 $26,587 $28,461 64.6%
Over 80% through 90% ....... 463 3,869 4,332 9.8
Over 90% through 100%...... 374 1,817 2,191 5.0
Over 100% .................... 936 2,708 3,644 8.3
No LTV available .............. – 116 116 .3
Loans purchased from GNMA
mortgage pools (a) .......... – 5,274 5,274 12.0
Total ........................ $3,647 $40,371 $44,018 100.0%
(a) Represents loans purchased from Government National Mortgage Association (“GNMA”)
mortgage pools whose payments are primarily insured by the Federal Housing
Administration or guaranteed by the Department of Veterans Affairs.
Home equity and second mortgages
(Dollars in Millions) Lines Loans Total
Percent
of Total
Prime Borrowers
Less than or equal to 80% .... $ 7,751 $ 535 $ 8,286 52.0%
Over 80% through 90% ....... 2,403 248 2,651 16.6
Over 90% through 100% ...... 1,600 197 1,797 11.3
Over 100% .................... 2,427 458 2,885 18.1
No LTV/CLTV available ........ 289 26 315 2.0
Total ........................ $14,470 $1,464 $15,934 100.0%
Sub-Prime Borrowers
Less than or equal to 80% .... $ 39 $ 28 $ 67 18.3%
Over 80% through 90% ....... 17 20 37 10.1
Over 90% through 100% ...... 17 38 55 15.0
Over 100% .................... 42 164 206 56.3
No LTV/CLTV available ........ – 1 1 .3
Total ........................ $ 115 $ 251 $ 366 100.0%
Other Borrowers
Less than or equal to 80% .... $ 280 $ 4 $ 284 66.7%
Over 80% through 90% ....... 64 5 69 16.2
Over 90% through 100% ...... 30 2 32 7.5
Over 100% .................... 32 6 38 8.9
No LTV/CLTV available ........ 3 – 3 .7
Total ........................ $ 409 $ 17 $ 426 100.0%
Total
Less than or equal to 80% .... $ 8,070 $ 567 $ 8,637 51.6%
Over 80% through 90% ....... 2,484 273 2,757 16.5
Over 90% through 100% ...... 1,647 237 1,884 11.3
Over 100% .................... 2,501 628 3,129 18.7
No LTV/CLTV available ........ 292 27 319 1.9
Total ........................ $14,994 $1,732 $16,726 100.0%
At December 31, 2012, approximately $1.6 billion of
residential mortgages were to customers that may be defined as
sub-prime borrowers based on credit scores from independent
agencies at loan origination, compared with $1.9 billion at
December 31, 2011. In addition to residential mortgages, at
December 31, 2012, $.4 billion of home equity and second
mortgage loans were to customers that may be defined as sub-
prime borrowers, compared with $.5 billion at December 31,
2011. The total amount of consumer lending segment
residential mortgage, home equity and second mortgage loans
to customers that may be defined as sub-prime borrowers
represented only .6 percent of total assets at December 31,
2012, compared with .7 percent at December 31, 2011. The
Company considers sub-prime loans to be those made to
borrowers with a risk of default significantly higher than those
approved for prime lending programs, as reflected in credit
scores obtained from independent agencies at loan origination,
in addition to other credit underwriting criteria. Sub-prime
portfolios include only loans originated according to the
Company’s underwriting programs specifically designed to
serve customers with weakened credit histories. The sub-prime
designation indicators have been and will continue to be
subject to re-evaluation over time as borrower characteristics,
payment performance and economic conditions change. The
sub-prime loans originated during periods from June 2009 and
U.S. BANCORP 39