Wells Fargo 2010 Annual Report Download - page 70

Risk Management – Credit Risk Management (continued)
TROUBLED DEBT RESTRUCTURINGS (TDRs)
Table 30: Troubled Debt Restructurings (TDRs)
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(in millions) 2010 2010 2010 2010 2009
Consumer TDRs:
Real estate 1-4 family first mortgage $ 11,603 10,951 9,525 7,972 6,685
Real estate 1-4 family junior lien mortgage 1,626 1,566 1,469 1,563 1,566
Other revolving credit and installment 778 674 502 310 17
Total consumer TDRs 14,007 13,191 11,496 9,845 8,268
Commercial TDRs 1,751 1,350 656 386 265
Total TDRs $ 15,758 14,541 12,152 10,231 8,533
TDRs on nonaccrual status $ 5,185 5,177 3,877 2,738 2,289
TDRs on accrual status 10,573 9,364 8,275 7,493 6,244
Total TDRs $ 15,758 14,541 12,152 10,231 8,533
Table 30 provides information regarding the recorded
investment of loans modified in TDRs. We establish an
allowance for loan losses when a loan is modified in a TDR,
which was $3.9 billion and $1.8 billion at December 31, 2010
and 2009, respectively. Total charge-offs related to loans
modified in a TDR were $812 million in 2010 and $479 million
in 2009.
Our nonaccrual policies are generally the same for all loan
types when a restructuring is involved. We underwrite loans at
the time of restructuring to determine whether there is sufficient
evidence of sustained repayment capacity based on the
borrower’s documented income, debt to income ratios, and other
factors. Any loans lacking sufficient evidence of sustained
repayment capacity at the time of modification are charged down
to the fair value of the collateral, if applicable. If the borrower
has demonstrated performance under the previous terms and
the underwriting process shows the capacity to continue to
perform under the restructured terms, the loan will remain in
accruing status. Otherwise, the loan will be placed in nonaccrual
status generally until the borrower demonstrates a sustained
period of performance, generally six consecutive months of
payments, or equivalent, inclusive of consecutive payments
made prior to modification. Loans will also be placed on
nonaccrual, and a corresponding charge-off is recorded to the
loan balance, if we believe that principal and interest
contractually due under the modified agreement will not be
collectible.
We do not forgive principal for a majority of our TDRs, but in
those situations where principal is forgiven, the entire amount of
such principal forgiveness is immediately charged off. When a
TDR performs in accordance with its modified terms, the loan
either continues to accrue interest (for performing loans), or will
return to accrual status after the borrower demonstrates a
sustained period of performance.
If interest due on all nonaccrual loans (including loans that
were, but are no longer on nonaccrual at year end) had been
accrued under the original terms, approximately $1.3 billion of
interest would have been recorded as income in 2010, compared
with $362 million recorded as interest income.
68