XML 45 R20.htm IDEA: XBRL DOCUMENT v3.10.0.1
Loans
 12 Months Ended
Dec. 31, 2018
Receivables [Abstract]  
Loans Loans
Loan accounting framework
The accounting for a loan depends on management’s strategy for the loan, and on whether the loan was credit-impaired at the date of acquisition. The Firm accounts for loans based on the following categories:
•
Originated or purchased loans held-for-investment (i.e., “retained”), other than PCI loans
•
Loans held-for-sale
•
Loans at fair value
•
PCI loans held-for-investment
The following provides a detailed accounting discussion of these loan categories:
Loans held-for-investment (other than PCI loans)
Originated or purchased loans held-for-investment, other than PCI loans, are recorded at the principal amount outstanding, net of the following: charge-offs; interest applied to principal (for loans accounted for on the cost recovery method); unamortized discounts and premiums; and net deferred loan fees or costs. Credit card loans also include billed finance charges and fees net of an allowance for uncollectible amounts.
Interest income
Interest income on performing loans held-for-investment, other than PCI loans, is accrued and recognized as interest income at the contractual rate of interest. Purchase price discounts or premiums, as well as net deferred loan fees or costs, are amortized into interest income over the contractual life of the loan as an adjustment of yield.
Nonaccrual loans
Nonaccrual loans are those on which the accrual of interest has been suspended. Loans (other than credit card loans and certain consumer loans insured by U.S. government agencies) are placed on nonaccrual status and considered nonperforming when full payment of principal and interest is not expected, regardless of delinquency status, or when principal and interest has been in default for a period of 90 days or more, unless the loan is both well-secured and in the process of collection. A loan is determined to be past due when the minimum payment is not received from the borrower by the contractually specified due date or for certain loans (e.g., residential real estate loans), when a monthly payment is due and unpaid for 30 days or more. Finally, collateral-dependent loans are typically maintained on nonaccrual status.
On the date a loan is placed on nonaccrual status, all interest accrued but not collected is reversed against interest income. In addition, the amortization of deferred amounts is suspended. Interest income on nonaccrual loans may be recognized as cash interest payments are received (i.e., on a cash basis) if the recorded loan balance is deemed fully collectible; however, if there is doubt regarding the ultimate collectibility of the recorded loan balance, all interest cash receipts are applied to reduce the
carrying value of the loan (the cost recovery method). For consumer loans, application of this policy typically results in the Firm recognizing interest income on nonaccrual consumer loans on a cash basis.
A loan may be returned to accrual status when repayment is reasonably assured and there has been demonstrated performance under the terms of the loan or, if applicable, the terms of the restructured loan.
As permitted by regulatory guidance, credit card loans are generally exempt from being placed on nonaccrual status; accordingly, interest and fees related to credit card loans continue to accrue until the loan is charged off or paid in full. The Firm separately establishes an allowance, which reduces loans and is charged to interest income, for the estimated uncollectible portion of accrued and billed interest and fee income on credit card loans.
Allowance for loan losses
The allowance for loan losses represents the estimated probable credit losses inherent in the held-for-investment loan portfolio at the balance sheet date and is recognized on the balance sheet as a contra asset, which brings the recorded investment to the net carrying value. Changes in the allowance for loan losses are recorded in the provision for credit losses on the Firm’s Consolidated statements of income. Refer to Note 13 for further information on the Firm’s accounting policies for the allowance for loan losses.
Charge-offs
Consumer loans, other than risk-rated business banking and auto loans, and PCI loans, are generally charged off or charged down to the net realizable value of the underlying collateral (i.e., fair value less costs to sell), with an offset to the allowance for loan losses, upon reaching specified stages of delinquency in accordance with standards established by the FFIEC. Residential real estate loans and non-modified credit card loans are generally charged off no later than 180 days past due. Scored auto and modified credit card loans are charged off no later than 120 days past due.
Certain consumer loans will be charged off or charged down to their net realizable value earlier than the FFIEC charge-off standards in certain circumstances as follows:
•
Loans modified in a TDR that are determined to be collateral-dependent.
•
Loans to borrowers who have experienced an event that suggests a loss is either known or highly certain are subject to accelerated charge-off standards (e.g., residential real estate and auto loans are charged off within 60 days of receiving notification of a bankruptcy filing).
•
Auto loans upon repossession of the automobile.
Other than in certain limited circumstances, the Firm typically does not recognize charge-offs on government-guaranteed loans.
Wholesale loans, risk-rated business banking loans and risk-rated auto loans are charged off when it is highly certain that a loss has been realized, including situations where a loan is determined to be both impaired and collateral-dependent. The determination of whether to recognize a charge-off includes many factors, including the prioritization of the Firm’s claim in bankruptcy, expectations of the workout/restructuring of the loan and valuation of the borrower’s equity or the loan collateral.
When a loan is charged down to the estimated net realizable value, the determination of the fair value of the collateral depends on the type of collateral (e.g., securities, real estate). In cases where the collateral is in the form of liquid securities, the fair value is based on quoted market prices or broker quotes. For illiquid securities or other financial assets, the fair value of the collateral is estimated using a discounted cash flow model.
For residential real estate loans, collateral values are based upon external valuation sources. When it becomes likely that a borrower is either unable or unwilling to pay, the Firm utilizes a broker’s price opinion, appraisal and/or an automated valuation model of the home based on an exterior-only valuation (“exterior opinions”), which is then updated at least every twelve months, or more frequently depending on various market factors. As soon as practicable after the Firm receives the property in satisfaction of a debt (e.g., by taking legal title or physical possession), the Firm generally obtains an appraisal based on an inspection that includes the interior of the home (“interior appraisals”). Exterior opinions and interior appraisals are discounted based upon the Firm’s experience with actual liquidation values as compared with the estimated values provided by exterior opinions and interior appraisals, considering state-specific factors.
For commercial real estate loans, collateral values are generally based on appraisals from internal and external valuation sources. Collateral values are typically updated every six to twelve months, either by obtaining a new appraisal or by performing an internal analysis, in accordance with the Firm’s policies. The Firm also considers both borrower- and market-specific factors, which may result in obtaining appraisal updates or broker price opinions at more frequent intervals.
Loans held-for-sale
Held-for-sale loans are measured at the lower of cost or fair value, with valuation changes recorded in noninterest revenue. For consumer loans, the valuation is performed on a portfolio basis. For wholesale loans, the valuation is performed on an individual loan basis.
Interest income on loans held-for-sale is accrued and recognized based on the contractual rate of interest.
Loan origination fees or costs and purchase price discounts or premiums are deferred in a contra loan account until the related loan is sold. The deferred fees or costs and discounts or premiums are an adjustment to the basis of the loan and therefore are included in the periodic determination of the lower of cost or fair value adjustments and/or the gain or loss recognized at the time of sale.
Held-for-sale loans are subject to the nonaccrual policies described above.
Because held-for-sale loans are recognized at the lower of cost or fair value, the Firm’s allowance for loan losses and charge-off policies do not apply to these loans.
Loans at fair value
Loans used in a market-making strategy or risk managed on a fair value basis are measured at fair value, with changes in fair value recorded in noninterest revenue.
Interest income on these loans is accrued and recognized based on the contractual rate of interest. Changes in fair value are recognized in noninterest revenue. Loan origination fees are recognized upfront in noninterest revenue. Loan origination costs are recognized in the associated expense category as incurred.
Because these loans are recognized at fair value, the Firm’s allowance for loan losses and charge-off policies do not apply to these loans. However, loans at fair value are subject to the nonaccrual policies described above.
Refer to Note 3 for further information on the Firm’s elections of fair value accounting under the fair value option. Refer to Note 2 and Note 3 for further information on loans carried at fair value and classified as trading assets.
PCI loans
PCI loans held-for-investment are initially measured at fair value. PCI loans have evidence of credit deterioration since the loan’s origination date and therefore it is probable, at acquisition, that all contractually required payments will not be collected. Because PCI loans are initially measured at fair value, which includes an estimate of future credit losses, no allowance for loan losses related to PCI loans is recorded at the acquisition date. Refer to page 231 of this Note for information on accounting for PCI loans subsequent to their acquisition.
Loan classification changes
Loans in the held-for-investment portfolio that management decides to sell are transferred to the held-for-sale portfolio at the lower of cost or fair value on the date of transfer. Credit-related losses are charged against the allowance for loan losses; non-credit related losses such as those due to changes in interest rates or foreign currency exchange rates are recognized in noninterest revenue.
In the event that management decides to retain a loan in the held-for-sale portfolio, the loan is transferred to the held-for-investment portfolio at the lower of cost or fair value on the date of transfer. These loans are subsequently assessed for impairment based on the Firm’s allowance methodology. For a further discussion of the methodologies used in establishing the Firm’s allowance for loan losses, refer to Note 13.
Loan modifications
The Firm seeks to modify certain loans in conjunction with its loss-mitigation activities. Through the modification, JPMorgan Chase grants one or more concessions to a borrower who is experiencing financial difficulty in order to minimize the Firm’s economic loss and avoid foreclosure or repossession of the collateral, and to ultimately maximize payments received by the Firm from the borrower. The concessions granted vary by program and by borrower-specific characteristics, and may include interest rate reductions, term extensions, payment deferrals, principal forgiveness, or the acceptance of equity or other assets in lieu of payments.
Such modifications are accounted for and reported as TDRs. A loan that has been modified in a TDR is generally considered to be impaired until it matures, is repaid, or is otherwise liquidated, regardless of whether the borrower performs under the modified terms. In certain limited cases, the effective interest rate applicable to the modified loan is at or above the current market rate at the time of the restructuring. In such circumstances, and assuming that the loan subsequently performs under its modified terms and the Firm expects to collect all contractual principal and interest cash flows, the loan is disclosed as impaired and as a TDR only during the year of the modification; in subsequent years, the loan is not disclosed as an impaired loan or as a TDR so long as repayment of the restructured loan under its modified terms is reasonably assured.
Loans, except for credit card loans, modified in a TDR are generally placed on nonaccrual status, although in many cases such loans were already on nonaccrual status prior to modification. These loans may be returned to performing status (the accrual of interest is resumed) if the following criteria are met: (i) the borrower has performed under the modified terms for a minimum of six months and/or six payments, and (ii) the Firm has an expectation that repayment of the modified loan is reasonably assured based on, for example, the borrower’s debt capacity and level of future earnings, collateral values, LTV ratios, and other current market considerations. In certain limited and well-defined circumstances in which the loan is current at the modification date, such loans are not placed on nonaccrual status at the time of modification.
Because loans modified in TDRs are considered to be impaired, these loans are measured for impairment using the Firm’s established asset-specific allowance methodology, which considers the expected re-default rates for the modified loans. A loan modified in a TDR generally remains subject to the asset-specific allowance methodology throughout its remaining life, regardless of whether the loan is performing and has been returned to accrual status and/or the loan has been removed from the impaired loans disclosures (i.e., loans restructured at market rates). For further discussion of the methodology used to estimate the Firm’s asset-specific allowance, refer to Note 13.
Foreclosed property
The Firm acquires property from borrowers through loan restructurings, workouts, and foreclosures. Property acquired may include real property (e.g., residential real estate, land, and buildings) and commercial and personal property (e.g., automobiles, aircraft, railcars, and ships).
The Firm recognizes foreclosed property upon receiving assets in satisfaction of a loan (e.g., by taking legal title or physical possession). For loans collateralized by real property, the Firm generally recognizes the asset received at foreclosure sale or upon the execution of a deed in lieu of foreclosure transaction with the borrower. Foreclosed assets are reported in other assets on the Consolidated balance sheets and initially recognized at fair value less costs to sell. Each quarter the fair value of the acquired property is reviewed and adjusted, if necessary, to the lower of cost or fair value. Subsequent adjustments to fair value are charged/credited to noninterest revenue. Operating expense, such as real estate taxes and maintenance, are charged to other expense.
Loan portfolio
The Firm’s loan portfolio is divided into three portfolio segments, which are the same segments used by the Firm to determine the allowance for loan losses: Consumer, excluding credit card; Credit card; and Wholesale. Within each portfolio segment the Firm monitors and assesses the credit risk in the following classes of loans, based on the risk characteristics of each loan class.
Consumer, excluding
credit card(a)
 
Credit card
 
Wholesale(f)
Residential real estate – excluding PCI
• Residential mortgage(b)
• Home equity(c)
Other consumer loans(d)
• Auto
• Consumer & Business Banking(e)
Residential real estate – PCI
• Home equity
• Prime mortgage
• Subprime mortgage
• Option ARMs
 
• Credit card loans
 
• Commercial and industrial
• Real estate
• Financial institutions
• Governments & Agencies
• Other(g)
(a)
Includes loans held in CCB, prime mortgage and home equity loans held in AWM and prime mortgage loans held in Corporate.
(b)
Predominantly includes prime (including option ARMs) and subprime loans.
(c)
Includes senior and junior lien home equity loans.
(d)
Includes certain business banking and auto dealer risk-rated loans that apply the wholesale methodology for determining the allowance for loan losses; these loans are managed by CCB, and therefore, for consistency in presentation, are included with the other consumer loan classes.
(e)
Predominantly includes Business Banking loans.
(f)
Includes loans held in CIB, CB, AWM and Corporate. Excludes prime mortgage and home equity loans held in AWM and prime mortgage loans held in Corporate. Classes are internally defined and may not align with regulatory definitions.
(g)
Includes loans to: individuals and individual entities (predominantly consists of Wealth Management clients within AWM and includes exposure to personal investment companies and personal and testamentary trusts), SPEs and Private education and civic organizations. For more information on SPEs, refer to Note 14.
The following tables summarize the Firm’s loan balances by portfolio segment.
December 31, 2018
Consumer, excluding credit card
Credit card(a)
Wholesale
Total
 
(in millions)
 
Retained
 
$
373,637

 
 
$
156,616

 
 
$
439,162

 
 
$
969,415

(b) 
Held-for-sale
 
95

 
 
16

 
 
11,877

 
 
11,988

 
At fair value
 
—

 
 
—

 
 
3,151

 
 
3,151

 
Total
 
$
373,732

 
 
$
156,632

 
 
$
454,190

 
 
$
984,554

 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
Consumer, excluding credit card
 
Credit card(a)
 
 
Wholesale
 
 
Total
 
(in millions)
 
Retained
 
$
372,553

 
 
$
149,387

 
 
$
402,898

 
 
$
924,838

(b) 
Held-for-sale
 
128

 
 
124

 
 
3,099

 
 
3,351

 
At fair value
 
—

 
 
—

 
 
2,508

 
 
2,508

 
Total
 
$
372,681

 
 
$
149,511

 
 
$
408,505

 
 
$
930,697

 
(a)
Includes accrued interest and fees net of an allowance for the uncollectible portion of accrued interest and fee income.
(b)
Loans (other than PCI loans and those for which the fair value option has been elected) are presented net of unamortized discounts and premiums and net deferred loan fees or costs. These amounts were not material as of December 31, 2018 and 2017.
The following tables provide information about the carrying value of retained loans purchased, sold and reclassified to held-for-sale during the periods indicated. Reclassifications of loans to held-for sale are non-cash transactions. The Firm manages its exposure to credit risk on an ongoing basis. Selling loans is one way that the Firm reduces its credit exposures. Loans that were reclassified to held-for-sale and sold in a subsequent period are excluded from the sales line of this table.
 
 
 
2018
Year ended December 31,
(in millions)
 
Consumer, excluding
credit card
Credit card
Wholesale
Total
Purchases
 
 
$
2,543

(a)(b) 
 
$
—

 
 
$
2,354

 
 
$
4,897

Sales
 
 
9,984

 
 
—

 
 
16,741

 
 
26,725

Retained loans reclassified to held-for-sale
 
 
36

 
 
—

 
 
2,276

 
 
2,312

 
 
 
2017
Year ended December 31,
(in millions)
 
Consumer, excluding
credit card
Credit card
Wholesale
Total
Purchases
 
 
$
3,461

(a)(b) 
 
$
—

 
 
$
1,799

 
 
$
5,260

Sales
 
 
3,405

 
 
—

 
 
11,063

 
 
14,468

Retained loans reclassified to held-for-sale
 
 
6,340

(c)

 
—

 
 
1,229

 
 
7,569

 
 
 
2016
Year ended December 31,
(in millions)
 
Consumer, excluding
credit card
Credit card
Wholesale
Total
Purchases
 
 
$
4,116

(a)(b) 
 
$
—

 
 
$
1,448

 
 
$
5,564

Sales
 
 
6,368

 
 
—

 
 
8,739

 
 
15,107

Retained loans reclassified to held-for-sale
 
 
321

 
 
—

 
 
2,381

 
 
2,702

(a)
Purchases predominantly represent the Firm’s voluntary repurchase of certain delinquent loans from loan pools as permitted by Government National Mortgage Association (“Ginnie Mae”) guidelines. The Firm typically elects to repurchase these delinquent loans as it continues to service them and/or manage the foreclosure process in accordance with applicable requirements of Ginnie Mae, FHA, RHS, and/or VA.
(b)
Excludes purchases of retained loans sourced through the correspondent origination channel and underwritten in accordance with the Firm’s standards. Such purchases were $18.6 billion, $23.5 billion and $30.4 billion for the years ended December 31, 2018, 2017 and 2016, respectively.
(c)
Includes the Firm’s student loan portfolio which was sold in 2017.

Gains and losses on sales of loans
Gains and losses on sales of loans (including adjustments to record loans held-for-sale at the lower of cost or fair value) recognized in other income were not material to the Firm for the years ended December 31, 2018, 2017 and 2016. In addition, the sale of loans may also result in write downs, recoveries or changes in the allowance recognized in the provision for credit losses. Consumer, excluding credit card, loan portfolio
Consumer loans, excluding credit card loans, consist primarily of residential mortgages, home equity loans and lines of credit, auto loans and consumer and business banking loans, with a focus on serving the prime consumer credit market. The portfolio also includes home equity loans secured by junior liens, prime mortgage loans with an interest-only payment period, and certain payment-option loans that may result in negative amortization.
The following table provides information about retained consumer loans, excluding credit card, by class. In 2017, the Firm sold its student loan portfolio.
December 31, (in millions)
2018

2017

Residential real estate – excluding PCI
 
 
Residential mortgage
$
231,078

$
216,496

Home equity
28,340

33,450

Other consumer loans
 
 
Auto
63,573

66,242

Consumer & Business Banking
26,612

25,789

Residential real estate – PCI
 
 
Home equity
8,963

10,799

Prime mortgage
4,690

6,479

Subprime mortgage
1,945

2,609

Option ARMs
8,436

10,689

Total retained loans
$
373,637

$
372,553


Delinquency rates are a primary credit quality indicator for consumer loans. Loans that are more than 30 days past due provide an early warning of borrowers who may be experiencing financial difficulties and/or who may be unable or unwilling to repay the loan. As the loan continues to age, it becomes more clear whether the borrower is likely either unable or unwilling to pay. In the case of residential real estate loans, late-stage delinquencies (greater than 150 days past due) are a strong indicator of loans that will ultimately result in a foreclosure or similar liquidation transaction. In addition to delinquency rates, other credit quality indicators for consumer loans vary based on the class of loan, as follows:
•
For residential real estate loans, including both non-PCI and PCI portfolios, the current estimated LTV ratio, or the combined LTV ratio in the case of junior lien loans, is an indicator of the potential loss severity in the event of default. Additionally, LTV or combined LTV ratios can provide insight into a borrower’s continued willingness to pay, as the delinquency rate of high-LTV loans tends to be greater than that for loans where the borrower has equity in the collateral. The geographic distribution of the loan collateral also provides insight as to the credit quality of the portfolio, as factors such as the regional economy, home price changes and specific events such as natural disasters, will affect credit quality. The borrower’s current or “refreshed” FICO score is a secondary credit-quality indicator for certain loans, as FICO scores are an indication of the borrower’s credit payment history. Thus, a loan to a borrower with a low FICO score (less than 660 ) is considered to be of higher risk than a loan to a borrower with a higher FICO score. Further, a loan to a borrower with a high LTV ratio and a low FICO score is at greater risk of default than a loan to a borrower that has both a high LTV ratio and a high FICO score.
•
For scored auto and scored business banking loans, geographic distribution is an indicator of the credit performance of the portfolio. Similar to residential real estate loans, geographic distribution provides insights into the portfolio performance based on regional economic activity and events.
•
Risk-rated business banking and auto loans are similar to wholesale loans in that the primary credit quality indicators are the risk rating that is assigned to the loan and whether the loans are considered to be criticized and/or nonaccrual. Risk ratings are reviewed on a regular and ongoing basis by Credit Risk Management and are adjusted as necessary for updated information about borrowers’ ability to fulfill their obligations. For further information about risk-rated wholesale loan credit quality indicators, refer to page 236 of this Note.
Residential real estate — excluding PCI loans
The following table provides information by class for retained residential real estate — excluding PCI loans.
Residential real estate – excluding PCI loans
 
 
 
 
 
 
December 31,
(in millions, except ratios)
Residential mortgage
 
Home equity
 
Total residential real estate – excluding PCI
2018
2017

2018
2017

2018
2017
Loan delinquency(a)
 
 
 
 
 
 
 
 
Current
$
225,899

$
208,713

 
$
27,611

$
32,391

 
$
253,510

$
241,104

30–149 days past due
2,763

4,234

 
453

671

 
3,216

4,905

150 or more days past due
2,416

3,549

 
276

388

 
2,692

3,937

Total retained loans
$
231,078

$
216,496

 
$
28,340

$
33,450

 
$
259,418

$
249,946

% of 30+ days past due to total retained loans(b)
0.48
%
0.77
%
 
2.57
%
3.17
%
 
0.71
%
1.09
%
90 or more days past due and government guaranteed(c)
$
2,541

$
4,172

 
—

—

 
$
2,541

$
4,172

Nonaccrual loans
1,765

2,175

 
1,323

1,610

 
3,088

3,785

Current estimated LTV ratios(d)(e)
 
 
 
 
 
 
 
 
Greater than 125% and refreshed FICO scores:
 
 
 
 
 
 
 
 
Equal to or greater than 660
$
25

$
37

 
$
6

$
10

 
$
31

$
47

Less than 660
13

19

 
1

3

 
14

22

101% to 125% and refreshed FICO scores:
 
 
 
 
 
 
 
 
Equal to or greater than 660
37

36

 
111

296

 
148

332

Less than 660
53

88

 
38

95

 
91

183

80% to 100% and refreshed FICO scores:
 
 
 
 
 
 
 
 
Equal to or greater than 660
3,977

4,369

 
986

1,676

 
4,963

6,045

Less than 660
281

483

 
326

569

 
607

1,052

Less than 80% and refreshed FICO scores:
 
 
 
 
 
 
 
 
Equal to or greater than 660
212,505

194,758

 
22,632

25,262

 
235,137

220,020

Less than 660
6,457

6,952

 
3,355

3,850

 
9,812

10,802

No FICO/LTV available
813

1,259

 
885

1,689

 
1,698

2,948

U.S. government-guaranteed
6,917

8,495

 
—

—

 
6,917

8,495

Total retained loans
$
231,078

$
216,496

 
$
28,340

$
33,450

 
$
259,418

$
249,946

Geographic region(f)
 
 
 
 
 
 
 
 
California
$
74,759

$
68,855

 
$
5,695

$
6,582

 
$
80,454

$
75,437

New York
28,847

27,473

 
5,769

6,866

 
34,616

34,339

Illinois
15,249

14,501

 
2,131

2,521

 
17,380

17,022

Texas
13,769

12,508

 
1,819

2,021

 
15,588

14,529

Florida
10,704

9,598

 
1,575

1,847

 
12,279

11,445

Washington
8,304

6,962

 
869

1,026

 
9,173

7,988

New Jersey
7,302

7,142

 
1,642

1,957

 
8,944

9,099

Colorado
8,140

7,335

 
521

632

 
8,661

7,967

Massachusetts
6,574

6,323

 
236

295

 
6,810

6,618

Arizona
4,434

4,109

 
1,158

1,439

 
5,592

5,548

All other(g)
52,996

51,690

 
6,925

8,264

 
59,921

59,954

Total retained loans
$
231,078

$
216,496

 
$
28,340

$
33,450

 
$
259,418

$
249,946


(a)
Individual delinquency classifications include mortgage loans insured by U.S. government agencies as follows: current included $2.8 billion and $2.4 billion; 30–149 days past due included $2.1 billion and $3.2 billion; and 150 or more days past due included $2.0 billion and $2.9 billion at December 31, 2018 and 2017, respectively.
(b)
At December 31, 2018 and 2017, residential mortgage loans excluded mortgage loans insured by U.S. government agencies of $4.1 billion and $6.1 billion, respectively, that are 30 or more days past due. These amounts have been excluded based upon the government guarantee.
(c)
These balances, which are 90 days or more past due, were excluded from nonaccrual loans as the loans are guaranteed by U.S government agencies. Typically the principal balance of the loans is insured and interest is guaranteed at a specified reimbursement rate subject to meeting agreed-upon servicing guidelines. At December 31, 2018 and 2017, these balances included $999 million and $1.5 billion, respectively, of loans that are no longer accruing interest based on the agreed-upon servicing guidelines. For the remaining balance, interest is being accrued at the guaranteed reimbursement rate. There were no loans that were not guaranteed by U.S. government agencies that are 90 or more days past due and still accruing interest at December 31, 2018 and 2017.
(d)
Represents the aggregate unpaid principal balance of loans divided by the estimated current property value. Current property values are estimated, at a minimum, quarterly, based on home valuation models using nationally recognized home price index valuation estimates incorporating actual data to the extent available and forecasted data where actual data is not available. These property values do not represent actual appraised loan level collateral values; as such, the resulting ratios are necessarily imprecise and should be viewed as estimates. Current estimated combined LTV for junior lien home equity loans considers all available lien positions, as well as unused lines, related to the property.
(e)
Refreshed FICO scores represent each borrower’s most recent credit score, which is obtained by the Firm on at least a quarterly basis.
(f)
The geographic regions presented in the table are ordered based on the magnitude of the corresponding loan balances at December 31, 2018.
(g)
At December 31, 2018 and 2017, included mortgage loans insured by U.S. government agencies of $6.9 billion and $8.5 billion, respectively. These amounts have been excluded from the geographic regions presented based upon the government guarantee.


Approximately 37% of the home equity portfolio are senior lien loans; the remaining balance are junior lien HELOANs or HELOCs. The following table provides the Firm’s delinquency statistics for junior lien home equity loans and lines as of December 31, 2018 and 2017.
 
 
Total loans
 
Total 30+ day delinquency rate
December 31, (in millions except ratios)
 
2018
2017
 
2018
2017
HELOCs:(a)
 
 
 
 
 
 
Within the revolving period(b)
 
$
5,608

$
6,363

 
0.25
%
0.50
%
Beyond the revolving period
 
11,286

13,532

 
2.80

3.56

HELOANs
 
1,030

1,371

 
2.82

3.50

Total
 
$
17,924

$
21,266

 
2.00
%
2.64
%
(a) These HELOCs are predominantly revolving loans for a 10-year period, after which time the HELOC converts to a loan with a 20-year amortization period, but also include HELOCs that allow interest-only payments beyond the revolving period.
(b) The Firm manages the risk of HELOCs during their revolving period by closing or reducing the undrawn line to the extent permitted by law when borrowers are experiencing financial difficulty.
HELOCs beyond the revolving period and HELOANs have higher delinquency rates than HELOCs within the revolving period. That is primarily because the fully-amortizing payment that is generally required for those products is higher than the minimum payment options available for HELOCs within the revolving period. The higher delinquency rates associated with amortizing HELOCs and HELOANs are factored into the Firm’s allowance for loan losses.
Impaired loans
The table below provides 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 13.
December 31,
(in millions)
Residential mortgage
 
Home equity
 
Total residential real estate
– excluding PCI
2018
2017
 
2018
2017
 
2018
2017
Impaired loans
 
 
 
 
 
 
 
 
With an allowance
$
3,381

$
4,407

 
$
1,142

$
1,236

 
$
4,523

$
5,643

Without an allowance(a)
1,184

1,213

 
870

882

 
2,054

2,095

Total impaired loans(b)(c)
$
4,565

$
5,620

 
$
2,012

$
2,118

 
$
6,577

$
7,738

Allowance for loan losses related to impaired loans
$
88

$
62

 
$
45

$
111

 
$
133

$
173

Unpaid principal balance of impaired loans(d)
6,207

7,741

 
3,466

3,701

 
9,673

11,442

Impaired loans on nonaccrual status(e)
1,459

1,743

 
955

1,032

 
2,414

2,775

(a)
Represents collateral-dependent residential real estate loans that are charged off to the fair value of the underlying collateral less costs 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, 2018, Chapter 7 residential real estate loans included approximately 13% of residential mortgages and approximately 9% of home equity that were 30 days or more past due.
(b)
At December 31, 2018 and 2017, $4.1 billion and $3.8 billion, respectively, of loans modified subsequent to repurchase from 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, 2018 and 2017. 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, 2018 and 2017, nonaccrual loans included $2.0 billion and $2.2 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 219-221 of this Note.
The following table presents average impaired loans and the related interest income reported by the Firm.
Year ended December 31,
(in millions)
Average impaired loans
 
Interest income on
impaired loans(a)
 
Interest income on impaired
loans on a cash basis(a)
2018
2017
2016
 
2018
2017
2016
 
2018
2017
2016
Residential mortgage
$
5,082

$
5,797

$
6,376

 
$
257

$
287

$
305

 
$
75

$
75

$
77

Home equity
2,078

2,189

2,311

 
131

127

125

 
84

80

80

Total residential real estate – excluding PCI
$
7,160

$
7,986

$
8,687

 
$
388

$
414

$
430

 
$
159

$
155

$
157

(a)
Generally, interest income on loans modified in TDRs is recognized on a cash basis until the borrower has made a minimum of six payments under the new terms, unless the loan is deemed to be collateral-dependent.
Loan modifications
Modifications of residential real estate loans, excluding PCI loans, are generally accounted for and reported as TDRs. There were no additional commitments to lend to borrowers whose residential real estate loans, excluding PCI loans, have been modified in TDRs.
The following table presents new TDRs reported by the Firm.
Year ended December 31,
(in millions)
2018

2017

2016

Residential mortgage
$
401

$
373

$
254

Home equity
286

321

385

Total residential real estate – excluding PCI
$
687

$
694

$
639


Nature and extent of modifications
The U.S. Treasury’s Making Home Affordable programs, as well as the Firm’s proprietary modification programs, generally provide various concessions to financially troubled borrowers including, but not limited to, interest rate reductions, term or payment extensions and deferral of principal and/or interest payments that would otherwise have been required under the terms of the original agreement.
The following table provides information about how residential real estate loans, excluding PCI loans, were modified under the Firm’s loss mitigation programs described above during the periods presented. This table excludes Chapter 7 loans where the sole concession granted is the discharge of debt.
Year ended December 31,
Residential mortgage
 
Home equity
 
Total residential real estate
 – excluding PCI
2018
2017
2016
 
2018
2017
2016
 
2018
2017
2016
Number of loans approved for a trial modification
2,570

1,283

1,945

 
2,316

2,321

3,760

 
4,886

3,604

5,705

Number of loans permanently modified
2,907

2,628

3,338

 
4,946

5,624

4,824

 
7,853

8,252

8,162

Concession granted:(a)
 
 
 
 
 
 
 
 
 
 
 
Interest rate reduction
40
%
63
%
76
%
 
62
%
59
%
75
%
 
54
%
60
%
76
%
Term or payment extension
55

72

90

 
66

69

83

 
62

70

86

Principal and/or interest deferred
44

15

16

 
20

10

19

 
29

12

18

Principal forgiveness
8

16

26

 
7

13

9

 
7

14

16

Other(b)
38

33

25

 
58

31

6

 
51

32

14

(a)
Represents concessions granted in permanent modifications as a percentage of the number of loans permanently modified. The sum of the percentages exceeds 100% because predominantly all of the modifications include more than one type of concession. Concessions offered on trial modifications are generally consistent with those granted on permanent modifications.
(b)
Includes variable interest rate to fixed interest rate modifications for the years ended December 31, 2018, 2017 and 2016. Also includes forbearances that meet the definition of a TDR for the year ended December 31, 2018. Forbearances suspend or reduce monthly payments for a specific period of time to address a temporary hardship.
Financial effects of modifications and redefaults
The following table provides information about the financial effects of the various concessions granted in modifications of residential real estate loans, excluding PCI, under the loss mitigation programs described above and about redefaults of certain loans modified in TDRs for the periods presented. The following table presents only the financial effects of permanent modifications and does not include temporary concessions offered through trial modifications. This table also excludes Chapter 7 loans where the sole concession granted is the discharge of debt.
Year ended
December 31,
(in millions, except weighted-average data)
Residential mortgage
 
Home equity
 
Total residential real estate – excluding PCI
 
 
2018
2017
2016
 
2018
2017
2016
 
2018
2017
2016
Weighted-average interest rate of loans with interest rate reductions – before TDR
5.65
%
5.15
%
5.59
%
 
5.39
%
4.94
%
4.99
%
 
5.50
%
5.06
%
5.36
%
Weighted-average interest rate of loans with interest rate reductions – after TDR
3.80

2.99

2.93

 
3.46

2.64

2.34

 
3.60

2.83

2.70

Weighted-average remaining contractual term (in years) of loans with term or payment extensions – before TDR
24

24

24

 
19

21

18

 
21

23

22

Weighted-average remaining contractual term (in years) of loans with term or payment extensions – after TDR
38

38

38

 
39

39

38

 
38

38

38

Charge-offs recognized upon permanent modification
$
1

$
2

$
4

 
$
1

$
1

$
1

 
$
2

$
3

$
5

Principal deferred
21

12

30

 
9

10

23

 
30

22

53

Principal forgiven
10

20

44

 
7

13

7

 
17

33

51

Balance of loans that redefaulted within one year of permanent modification(a)
$
97

$
124

$
98

 
$
64

$
56

$
40

 
$
161

$
180

$
138

(a)
Represents loans permanently modified in TDRs that experienced a payment default in the periods presented, and for which the payment default occurred within one year of the modification. The dollar amounts presented represent the balance of such loans at the end of the reporting period in which such loans defaulted. For residential real estate loans modified in TDRs, payment default is deemed to occur when the loan becomes two contractual payments past due. In the event that a modified loan redefaults, it is probable that the loan will ultimately be liquidated through foreclosure or another similar type of liquidation transaction. Redefaults of loans modified within the last 12 months may not be representative of ultimate redefault levels.
At December 31, 2018, the weighted-average estimated remaining lives of residential real estate loans, excluding PCI loans, permanently modified in TDRs were 9 years for residential mortgage and 8 years for home equity. The estimated remaining lives of these loans reflect estimated prepayments, both voluntary and involuntary (i.e., foreclosures and other forced liquidations).
Active and suspended foreclosure
At December 31, 2018 and 2017, the Firm had non-PCI residential real estate loans, excluding those insured by U.S. government agencies, with a carrying value of $653 million and $787 million, respectively, that were not included in REO, but were in the process of active or suspended foreclosure.
Other consumer loans
The table below provides information for other consumer retained loan classes, including auto and business banking loans.
December 31,
(in millions, except ratios)
Auto
 
Consumer &
Business Banking
 
Total other consumer
2018
2017
 
2018
2017
 
2018
2017
Loan delinquency
 
 
 
 
 
 
 
 
Current
$
62,984

$
65,651

 
$
26,249

$
25,454

 
$
89,233

$
91,105

30–119 days past due
589

584

 
252

213

 
841

797

120 or more days past due
—

7

 
111

122

 
111

129

Total retained loans
$
63,573

$
66,242

 
$
26,612

$
25,789

 
$
90,185

$
92,031

% of 30+ days past due to total retained loans
0.93
%
0.89
%
 
1.36
%
1.30
%
 
1.06
%
1.01
%
Nonaccrual loans(a)
128

141

 
245

283

 
373

424

Geographic region(b)
 
 
 
California
$
8,330

$
8,445

 
$
5,520

$
5,032

 
$
13,850

$
13,477

Texas
6,531

7,013

 
2,993

2,916

 
9,524

9,929

New York
3,863

4,023

 
4,381

4,195

 
8,244

8,218

Illinois
3,716

3,916

 
2,046

2,017

 
5,762

5,933

Florida
3,256

3,350

 
1,502

1,424

 
4,758

4,774

Arizona
2,084

2,221

 
1,491

1,383

 
3,575

3,604

Ohio
1,973

2,105

 
1,305

1,380

 
3,278

3,485

New Jersey
1,981

2,044

 
723

721

 
2,704

2,765

Michigan
1,357

1,418

 
1,329

1,357

 
2,686

2,775

Louisiana
1,587

1,656

 
860

849

 
2,447

2,505

All other
28,895

30,051

 
4,462

4,515

 
33,357

34,566

Total retained loans
$
63,573

$
66,242

 
$
26,612

$
25,789

 
$
90,185

$
92,031

Loans by risk ratings(c)
 
 
 
 
 
 
 
 
Noncriticized
$
15,749

$
15,604

 
$
18,743

$
17,938

 
$
34,492

$
33,542

Criticized performing
273

93

 
751

791

 
1,024

884

Criticized nonaccrual
—

9

 
191

213

 
191

222

(a)
There were no loans that were 90 or more days past due and still accruing interest at December 31, 2018 and December 31, 2017.
(b)
The geographic regions presented in the table are ordered based on the magnitude of the corresponding loan balances at December 31, 2018.
(c)
For risk-rated business banking and auto loans, the primary credit quality indicator is the risk rating of the loan, including whether the loans are considered to be criticized and/or nonaccrual.
Other consumer impaired loans and loan modifications
The following table provides information about the Firm’s other consumer impaired loans, including risk-rated business banking and auto loans that have been placed on nonaccrual status, and loans that have been modified in TDRs.
December 31, (in millions)
2018

2017

Impaired loans
 
 
With an allowance
$
222

$
272

Without an allowance(a)
29

26

Total impaired loans(b)(c)
$
251

$
298

Allowance for loan losses related to impaired loans
$
63

$
73

Unpaid principal balance of impaired loans(d)
355

402

Impaired loans on nonaccrual status
229

268

(a)
When discounted cash flows, collateral value or market price equals or exceeds the recorded investment in the loan, the loan does not require an allowance. This typically occurs when the impaired loans have been partially charged off and/or there have been interest payments received and applied to the loan balance.
(b)
Predominantly all other consumer impaired loans are in the U.S.
(c)
Other consumer average impaired loans were $275 million, $427 million and $635 million for the years ended December 31, 2018, 2017 and 2016, respectively. The related interest income on impaired loans, including those on a cash basis, was not material for the years ended December 31, 2018, 2017 and 2016.
(d)
Represents the contractual amount of principal owed at December 31, 2018 and 2017. The unpaid principal balance differs from the impaired loan balances due to various factors, including charge-offs, interest payments received and applied to the principal balance, net deferred loan fees or costs and unamortized discounts or premiums on purchased loans.
Loan modifications
Certain other consumer loan modifications are considered to be TDRs as they provide various concessions to borrowers who are experiencing financial difficulty. All of these TDRs are reported as impaired loans. At December 31, 2018 and 2017, other consumer loans modified in TDRs were $79 million and $102 million, respectively. The impact of these modifications, as well as new TDRs, were not material to the Firm for the years ended December 31, 2018, 2017 and 2016. Additional commitments to lend to borrowers whose loans have been modified in TDRs as of December 31, 2018 and 2017 were not material. TDRs on nonaccrual status were $57 million and $72 million at December 31, 2018 and 2017, respectively.

Purchased credit-impaired loans
PCI loans are initially recorded at fair value at acquisition. PCI loans acquired in the same fiscal quarter may be aggregated into one or more pools, provided that the loans have common risk characteristics. A pool is then accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. All of the Firm’s residential real estate PCI loans were acquired in the same fiscal quarter and aggregated into pools of loans with common risk characteristics.
On a quarterly basis, the Firm estimates the total cash flows (both principal and interest) expected to be collected over the remaining life of each pool. These estimates incorporate assumptions regarding default rates, loss severities, the amounts and timing of prepayments and other factors that reflect then-current market conditions. Probable decreases in expected cash flows (i.e., increased credit losses) trigger the recognition of impairment, which is then measured as the present value of the expected principal loss plus any related forgone interest cash flows, discounted at the pool’s effective interest rate. Impairments are recognized through the provision for credit losses and an increase in the allowance for loan losses. Probable and significant increases in expected cash flows (e.g., decreased credit losses, the net benefit of modifications) would first reverse any previously recorded allowance for loan losses with any remaining increases recognized prospectively as a yield adjustment over the remaining estimated lives of the underlying loans. The impacts of (i) prepayments, (ii) changes in variable interest rates, and (iii) any other changes in the timing of expected cash flows are generally recognized prospectively as adjustments to interest income.
The Firm continues to modify certain PCI loans. The impact of these modifications is incorporated into the Firm’s quarterly assessment of whether a probable and significant change in expected cash flows has occurred, and the loans continue to be accounted for and reported as PCI loans. In evaluating the effect of modifications on expected cash flows, the Firm incorporates the effect of any forgone interest and also considers the potential for redefault. The Firm develops product-specific probability of default estimates, which are used to compute expected credit losses. In developing these probabilities of default, the Firm considers the relationship between the credit quality characteristics of the underlying loans and certain assumptions about home prices and unemployment based upon industry-wide data. The Firm also considers its own historical loss experience to-date based on actual redefaulted modified PCI loans.
The excess of cash flows expected to be collected over the carrying value of the underlying loans is referred to as the accretable yield. This amount is not reported on the Firm’s Consolidated balance sheets but is accreted into interest income at a level rate of return over the remaining estimated lives of the underlying pools of loans.
Since the timing and amounts of expected cash flows for the Firm’s PCI consumer loan pools are reasonably estimable, interest is being accreted and the loan pools are being reported as performing loans. No interest would be accreted and the PCI loan pools would be reported as nonaccrual loans if the timing and/or amounts of expected cash flows on the loan pools were determined not to be reasonably estimable.
The liquidation of PCI loans, which may include sales of loans, receipt of payment in full from the borrower, or foreclosure, results in removal of the loans from the underlying PCI pool. When the amount of the liquidation proceeds (e.g., cash, real estate), if any, is less than the unpaid principal balance of the loan, the difference is first applied against the PCI pool’s nonaccretable difference for principal losses (i.e., the lifetime credit loss estimate established as a purchase accounting adjustment at the acquisition date). When the nonaccretable difference for a particular loan pool has been fully depleted, any excess of the unpaid principal balance of the loan over the liquidation proceeds is written off against the PCI pool’s allowance for loan losses. Write-offs of PCI loans also include other adjustments, primarily related to principal forgiveness modifications. Because the Firm’s PCI loans are accounted for at a pool level, the Firm does not recognize charge-offs of PCI loans when they reach specified stages of delinquency (i.e., unlike non-PCI consumer loans, these loans are not charged off based on FFIEC standards).
The PCI portfolio affects the Firm’s results of operations primarily through: (i) contribution to net interest margin; (ii) expense related to defaults and servicing resulting from the liquidation of the loans; and (iii) any provision for loan losses. The Firm’s residential real estate PCI loans were funded based on the interest rate characteristics of the loans. For example, variable-rate loans were funded with variable-rate liabilities and fixed-rate loans were funded with fixed-rate liabilities with a similar maturity profile. A net spread will be earned on the declining balance of the portfolio, which is estimated as of December 31, 2018, to have a remaining weighted-average life of 7 years.
Residential real estate – PCI loans
The table below provides information about the Firm’s consumer, excluding credit card, PCI loans.
December 31,
(in millions, except ratios)
Home equity
 
Prime mortgage
 
Subprime mortgage
 
Option ARMs
 
Total PCI
2018
2017

2018
2017

2018
2017

2018
2017

2018
2017
Carrying value(a)
$
8,963

$
10,799

 
$
4,690

$
6,479

 
$
1,945

$
2,609

 
$
8,436

$
10,689

 
$
24,034

$
30,576

Loan delinquency (based on unpaid principal balance)
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
$
8,624

$
10,272

 
$
4,226

$
5,839

 
$
2,033

$
2,640

 
$
7,592

$
9,662

 
$
22,475

$
28,413

30–149 days past due
278

356

 
259

336

 
286

381

 
398

547

 
1,221

1,620

150 or more days past due
242

392

 
223

327

 
123

176

 
457

689

 
1,045

1,584

Total loans
$
9,144

$
11,020

 
$
4,708

$
6,502

 
$
2,442

$
3,197

 
$
8,447

$
10,898

 
$
24,741

$
31,617

% of 30+ days past due to total loans
5.69
%
6.79
%
 
10.24
%
10.20
%
 
16.75
%
17.42
%
 
10.12
%
11.34
%
 
9.16
%
10.13
%
Current estimated LTV ratios (based on unpaid principal balance)(b)(c)
 
 
 
 
 
 
 
 
 
 
 
 
Greater than 125% and refreshed FICO scores:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equal to or greater than 660
$
17

$
33

 
$
1

$
4

 
$
—

$
2

 
$
3

$
6

 
$
21

$
45

Less than 660
13

21

 
7

16

 
9

20

 
7

9

 
36

66

101% to 125% and refreshed FICO scores:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equal to or greater than 660
135

274

 
6

16

 
4

20

 
17

43

 
162

353

Less than 660
65

132

 
22

42

 
35

75

 
33

71

 
155

320

80% to 100% and refreshed FICO scores:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equal to or greater than 660
805

1,195

 
75

221

 
54

119

 
119

316

 
1,053

1,851

Less than 660
388

559

 
112

230

 
161

309

 
190

371

 
851

1,469

Lower than 80% and refreshed FICO scores:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equal to or greater than 660
5,548

6,134

 
2,689

3,551

 
739

895

 
5,111

6,113

 
14,087

16,693

Less than 660
1,908

2,095

 
1,568

2,103

 
1,327

1,608

 
2,622

3,499

 
7,425

9,305

No FICO/LTV available
265

577

 
228

319

 
113

149

 
345

470

 
951

1,515

Total unpaid principal balance
$
9,144

$
11,020

 
$
4,708

$
6,502

 
$
2,442

$
3,197

 
$
8,447

$
10,898

 
$
24,741

$
31,617

Geographic region (based on unpaid principal balance)(d)
 
 
 
 
 
 
 
 
 
 
 
 
 
California
$
5,420

$
6,555

 
$
2,578

$
3,716

 
$
593

$
797

 
$
4,798

$
6,225

 
$
13,389

$
17,293

Florida
976

1,137

 
332

428

 
234

296

 
713

878

 
2,255

2,739

New York
525

607

 
365

457

 
268

330

 
502

628

 
1,660

2,022

Washington
419

532

 
98

135

 
44

61

 
177

238

 
738

966

Illinois
233

273

 
154

200

 
123

161

 
199

249

 
709

883

New Jersey
210

242

 
134

178

 
88

110

 
258

336

 
690

866

Massachusetts
65

79

 
113

149

 
73

98

 
240

307

 
491

633

Maryland
48

57

 
95

129

 
96

132

 
178

232

 
417

550

Virginia
54

66

 
91

123

 
37

51

 
211

280

 
393

520

Arizona
165

203

 
69

106

 
43

60

 
112

156

 
389

525

All other
1,029

1,269

 
679

881

 
843

1,101

 
1,059

1,369

 
3,610

4,620

Total unpaid principal balance
$
9,144

$
11,020

 
$
4,708

$
6,502

 
$
2,442

$
3,197

 
$
8,447

$
10,898

 
$
24,741

$
31,617

(a)
Carrying value includes the effect of fair value adjustments that were applied to the consumer PCI portfolio at the date of acquisition.
(b)
Represents the aggregate unpaid principal balance of loans divided by the estimated current property value. Current property values are estimated, at a minimum, quarterly, based on home valuation models using nationally recognized home price index valuation estimates incorporating actual data to the extent available and forecasted data where actual data is not available. These property values do not represent actual appraised loan level collateral values; as such, the resulting ratios are necessarily imprecise and should be viewed as estimates. Current estimated combined LTV for junior lien home equity loans considers all available lien positions, as well as unused lines, related to the property.
(c)
Refreshed FICO scores represent each borrower’s most recent credit score, which is obtained by the Firm on at least a quarterly basis.
(d)
The geographic regions presented in the table are ordered based on the magnitude of the corresponding loan balances at December 31, 2018.
Approximately 26% of the PCI home equity portfolio are senior lien loans; the remaining balance are junior lien HELOANs or HELOCs. The following table provides delinquency statistics for PCI junior lien home equity loans and lines of credit based on the unpaid principal balance as of December 31, 2018 and 2017.
December 31,
(in millions, except ratios)
 
Total loans
 
Total 30+ day delinquency rate
 
2018
2017
 
2018
2017
HELOCs:(a)(b)
 
$
6,531

$
7,926

 
4.00
%
4.62
%
HELOANs
 
280

360

 
3.57

5.28

Total
 
$
6,811

$
8,286

 
3.98
%
4.65
%
(a)
In general, these HELOCs are revolving loans for a 10-year period, after which time the HELOC converts to an interest-only loan with a balloon payment at the end of the loan’s term. Substantially all HELOCs are beyond the revolving period.
(b)
Includes loans modified into fixed rate amortizing loans.
The table below presents the accretable yield activity for the Firm’s PCI consumer loans for the years ended December 31, 2018, 2017 and 2016, and represents the Firm’s estimate of gross interest income expected to be earned over the remaining life of the PCI loan portfolios. The table excludes the cost to fund the PCI portfolios, and therefore the accretable yield does not represent net interest income expected to be earned on these portfolios.
Year ended December 31,
(in millions, except ratios)
Total PCI
2018

 
2017

 
2016

Beginning balance
$
11,159

 
$
11,768

 
$
13,491

Accretion into interest income
(1,249
)
 
(1,396
)
 
(1,555
)
Changes in interest rates on variable-rate loans
(109
)
 
503

 
260

Other changes in expected cash flows(a)
(1,379
)
 
284

 
(428
)
Balance at December 31
$
8,422

 
$
11,159

 
$
11,768

Accretable yield percentage
4.92
%
 
4.53
%
 
4.35
%
(a)
Other changes in expected cash flows may vary from period to period as the Firm continues to refine its cash flow model, for example cash flows expected to be collected due to the impact of modifications and changes in prepayment assumptions.

Active and suspended foreclosure
At December 31, 2018 and 2017, the Firm had PCI residential real estate loans with an unpaid principal balance of $964 million and $1.3 billion, respectively, that were not included in REO, but were in the process of active or suspended foreclosure.Credit card loan portfolio
The credit card portfolio segment includes credit card loans originated and purchased by the Firm. Delinquency rates are the primary credit quality indicator for credit card loans as they provide an early warning that borrowers may be experiencing difficulties (30 days past due); information on those borrowers that have been delinquent for a longer period of time (90 days past due) is also considered. In addition to delinquency rates, the geographic distribution of the loans provides insight as to the credit quality of the portfolio based on the regional economy.
While the borrower’s credit score is another general indicator of credit quality, the Firm does not view credit scores as a primary indicator of credit quality because the borrower’s credit score tends to be a lagging indicator. The distribution of such scores provides a general indicator of credit quality trends within the portfolio; however, the score does not capture all factors that would be predictive of future credit performance. Refreshed FICO score information, which is obtained at least quarterly, for a statistically significant random sample of the credit card portfolio is indicated in the following table. FICO is considered to be the industry benchmark for credit scores.
The Firm generally originates new card accounts to prime consumer borrowers. However, certain cardholders’ FICO scores may decrease over time, depending on the performance of the cardholder and changes in credit score calculation.
The table below provides information about the Firm’s credit card loans.
As of or for the year ended December 31,
(in millions, except ratios)
2018
2017
Net charge-offs
$
4,518

$
4,123

% of net charge-offs to retained loans
3.10
%
2.95
%
Loan delinquency
 
 
Current and less than 30 days past due
and still accruing
$
153,746

$
146,704

30–89 days past due and still accruing
1,426

1,305

90 or more days past due and still accruing
1,444

1,378

Total retained credit card loans
$
156,616

$
149,387

Loan delinquency ratios
 
 
% of 30+ days past due to total retained loans
1.83
%
1.80
%
% of 90+ days past due to total retained loans
0.92

0.92

Credit card loans by geographic region(a)
 
 
California
$
23,757

$
22,245

Texas
15,085

14,200

New York
13,601

13,021

Florida
9,770

9,138

Illinois
8,938

8,585

New Jersey
6,739

6,506

Ohio
5,094

4,997

Pennsylvania
4,996

4,883

Colorado
4,309

4,006

Michigan
3,912

3,826

All other
60,415

57,980

Total retained credit card loans
$
156,616

$
149,387

Percentage of portfolio based on carrying value with estimated refreshed FICO scores
 
 
Equal to or greater than 660
84.2
%
84.0
%
Less than 660
15.0

14.6

No FICO available
0.8

1.4


a)
The geographic regions presented in the table are ordered based on the magnitude of the corresponding loan balances at December 31, 2018.


Credit card impaired loans and loan modifications
The table below provides information about the Firm’s impaired credit card loans. All of these loans are considered to be impaired as they have been modified in TDRs.
December 31, (in millions)
2018

2017

Impaired credit card loans with an allowance(a)(b)(c)
$
1,319

$
1,215

Allowance for loan losses related to impaired credit card loans
440

383

(a)
The carrying value and the unpaid principal balance are the same for credit card impaired loans.
(b)
There were no impaired loans without an allowance.
(c)
Predominantly all impaired credit card loans are in the U.S.
The following table presents average balances of impaired credit card loans and interest income recognized on those loans.
Year ended December 31,
(in millions)
2018

2017

2016

Average impaired credit card loans
$
1,260

$
1,214

$
1,325

Interest income on
  impaired credit card loans
65

59

63


Loan modifications
The Firm may offer one of a number of loan modification programs to credit card borrowers who are experiencing financial difficulty. Most of the credit card loans have been modified under long-term programs for borrowers who are experiencing financial difficulties. These modifications involve placing the customer on a fixed payment plan, generally for 60 months, and typically include reducing the interest rate on the credit card. Substantially all modifications are considered to be TDRs.
If the cardholder does not comply with the modified payment terms, then the credit card loan continues to age and will ultimately be charged-off in accordance with the Firm’s standard charge-off policy. In most cases, the Firm does not reinstate the borrower’s line of credit.
New enrollments in these loan modification programs for the years ended December 31, 2018, 2017 and 2016, were $866 million, $756 million and $636 million, respectively. For all periods disclosed, new enrollments were less than 1% of total retained credit card loans.
Financial effects of modifications and redefaults
The following table provides information about the financial effects of the concessions granted on credit card loans modified in TDRs and redefaults for the periods presented.
Year ended December 31,
(in millions, except
weighted-average data)
 
2018
2017
2016
Weighted-average interest rate of loans – before TDR
 
17.98
%
16.58
%
15.56
%
Weighted-average interest rate of loans – after TDR
 
5.16

4.88

4.76

Loans that redefaulted within one year of modification(a)(b)
 
$
116

$
93

$
74

(a)
Represents loans modified in TDRs that experienced a payment default in the periods presented, and for which the payment default occurred within one year of the modification. The amounts presented represent the balance of such loans as of the end of the quarter in which they defaulted.
(b)
The prior period amounts have been revised to conform with the current period presentation.
For credit card loans modified in TDRs, payment default is deemed to have occurred when the borrower misses two consecutive contractual payments. A substantial portion of these loans are expected to be charged-off in accordance with the Firm’s standard charge-off policy. Based on historical experience, the estimated weighted-average default rate for modified credit card loans was expected to be 33.38%, 31.54% and 28.87% as of December 31, 2018, 2017 and 2016, respectively.Wholesale loan portfolio
Wholesale loans include loans made to a variety of clients, ranging from large corporate and institutional clients to high-net-worth individuals.
The primary credit quality indicator for wholesale loans is the risk rating assigned to each loan. Risk ratings are used to identify the credit quality of loans and differentiate risk within the portfolio. Risk ratings on loans consider the PD and the LGD. The PD is the likelihood that a loan will default. The LGD is the estimated loss on the loan that would be realized upon the default of the borrower and takes into consideration collateral and structural support for each credit facility.
Management considers several factors to determine an appropriate risk rating, including the obligor’s debt capacity and financial flexibility, the level of the obligor’s earnings, the amount and sources for repayment, the level and nature of contingencies, management strength, and the industry and geography in which the obligor operates. The Firm’s definition of criticized aligns with the banking regulatory definition of criticized exposures, which consist of special mention, substandard and doubtful categories. Risk ratings generally represent ratings profiles similar to those defined by S&P and Moody’s. Investment-grade ratings range from “AAA/Aaa” to “BBB-/Baa3.” Noninvestment-grade ratings are classified as noncriticized (“BB+/Ba1 and B-/B3”) and criticized (“CCC+”/“Caa1 and below”), and the criticized portion is further subdivided into performing and nonaccrual loans, representing management’s assessment of the collectibility of principal and interest. Criticized loans have a higher probability of default than noncriticized loans.
Risk ratings are reviewed on a regular and ongoing basis by Credit Risk Management and are adjusted as necessary for updated information affecting the obligor’s ability to fulfill its obligations.
As noted above, the risk rating of a loan considers the industry in which the obligor conducts its operations. As part of the overall credit risk management framework, the Firm focuses on the management and diversification of its industry and client exposures, with particular attention paid to industries with actual or potential credit concern. Refer to Note 4 for further detail on industry concentrations.
The table below provides information by class of receivable for the retained loans in the Wholesale portfolio segment. For additional information on industry concentrations, refer to Note 4.
As of or for the year ended December 31,
(in millions, except ratios)
Commercial
and industrial
 
Real estate
 
Financial
institutions
 
Governments & Agencies
 
Other(d)
 
Total
retained loans
2018
2017
 
2018
2017
 
2018
2017
 
2018
2017
 
2018
2017
 
2018
2017
Loans by risk ratings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment-grade
$
73,497

$
68,071

 
$
100,107

$
98,467

 
$
32,178

$
26,791

 
$
13,984

$
15,140

 
$
119,963

$
103,212

 
$
339,729

$
311,681

Noninvestment-
  grade:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncriticized
51,720

46,558

 
14,876

14,335

 
15,316

13,071

 
201

369

 
11,478

9,988

 
93,591

84,321

Criticized performing
3,738

3,983

 
620

710

 
150

210

 
2

—

 
182

259

 
4,692

5,162

Criticized nonaccrual
851

1,357

 
134

136

 
4

2

 
—

—

 
161

239

 
1,150

1,734

Total
noninvestment- grade
56,309

51,898

 
15,630

15,181

 
15,470

13,283

 
203

369

 
11,821

10,486

 
99,433

91,217

Total retained loans
$
129,806

$
119,969

 
$
115,737

$
113,648

 
$
47,648

$
40,074

 
$
14,187

$
15,509

 
$
131,784

$
113,698

 
$
439,162

$
402,898

% of total criticized exposure to total retained loans
3.54
%
4.45
%
 
0.65
 %
0.74
%
 
0.32
%
0.53
%
 
0.01
%
—

 
0.26
%
0.44
%
 
1.33
%
1.71
%
% of criticized nonaccrual to total retained loans
0.66

1.13

 
0.12

0.12

 
0.01

—

 
—

—

 
0.12

0.21

 
0.26

0.43

Loans by geographic distribution(a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total non-U.S.
$
29,572

$
28,470

 
$
2,967

$
3,101

 
$
18,524

$
16,790

 
$
3,150

$
2,906

 
$
48,433

$
44,112

 
$
102,646

$
95,379

Total U.S.
100,234

91,499

 
112,770

110,547

 
29,124

23,284

 
11,037

12,603

 
83,351

69,586

 
336,516

307,519

Total retained loans
$
129,806

$
119,969

 
$
115,737

$
113,648

 
$
47,648

$
40,074

 
$
14,187

$
15,509

 
$
131,784

$
113,698

 
$
439,162

$
402,898

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net charge-offs/(recoveries)
$
165

$
117

 
$
(20
)
$
(4
)
 
$
—

$
6

 
$
—

$
5

 
$
10

$
(5
)
 
$
155

$
119

% of net
charge-offs/(recoveries) to end-of-period retained loans
0.13
%
0.10
%
 
(0.02
)%
—
%
 
—
%
0.01
%
 
—
%
0.03
%
 
0.01
%
—

 
0.04
%
0.03
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan
delinquency(b)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current and less than 30 days past due and still accruing
$
128,678

$
118,288

 
$
115,533

$
113,258

 
$
47,622

$
40,042

 
$
14,165

$
15,493

 
$
130,918

$
112,559

 
$
436,916

$
399,640

30–89 days past due and still accruing
109

216

 
67

242

 
12

15

 
18

12

 
702

898

 
908

1,383

90 or more days past due and still accruing(c)
168

108

 
3

12

 
10

15

 
4

4

 
3

2

 
188

141

Criticized nonaccrual
851

1,357

 
134

136

 
4

2

 
—

—

 
161

239

 
1,150

1,734

Total retained loans
$
129,806

$
119,969

 
$
115,737

$
113,648

 
$
47,648

$
40,074

 
$
14,187

$
15,509

 
$
131,784

$
113,698

 
$
439,162

$
402,898

(a)
The U.S. and non-U.S. distribution is determined based predominantly on the domicile of the borrower.
(b)
The credit quality of wholesale loans is assessed primarily through ongoing review and monitoring of an obligor’s ability to meet contractual obligations rather than relying on the past due status, which is generally a lagging indicator of credit quality.
(c)
Represents loans that are considered well-collateralized and therefore still accruing interest.
(d)
Other includes individuals and individual entities (predominantly consists of Wealth Management clients within AWM and includes exposure to personal investment companies and personal and testamentary trusts), SPEs and Private education and civic organizations. For more information on SPEs, refer to Note 14.

The following table presents additional information on the real estate class of loans within the Wholesale portfolio for the periods indicated. Exposure consists primarily of secured commercial loans, of which multifamily is the largest segment. Multifamily lending finances acquisition, leasing and construction of apartment buildings, and includes exposure to real estate investment trusts (“REITs”). Other commercial lending largely includes financing for acquisition, leasing and construction, largely for office, retail and industrial real estate, and includes exposure to REITs. Included in real estate loans is $10.5 billion and $10.8 billion as of December 31, 2018 and 2017, respectively, of construction and development exposure consisting of loans originally purposed for construction and development, general purpose loans for builders, as well as loans for land subdivision and pre-development.
December 31,
(in millions, except ratios)
Multifamily
 
Other Commercial
 
Total real estate loans
2018
2017
 
2018
2017
 
2018
2017
Real estate retained loans
$
79,184

$
77,597

 
$
36,553

$
36,051

 
$
115,737

$
113,648

Criticized exposure
388

491

 
366

355

 
754

846

% of total criticized exposure to total real estate retained loans
0.49
%
0.63
%
 
1.00
%
0.98
%
 
0.65
%
0.74
%
Criticized nonaccrual
$
57

$
44

 
$
77

$
92

 
$
134

$
136

% of criticized nonaccrual loans to total real estate retained loans
0.07
%
0.06
%
 
0.21
%
0.26
%
 
0.12
%
0.12
%


Wholesale impaired retained loans and loan modifications
Wholesale impaired retained loans consist of loans that have been placed on nonaccrual status and/or that have been modified in a TDR. All impaired loans are evaluated for an asset-specific allowance as described in Note 13.
The table below sets forth information about the Firm’s wholesale impaired retained loans.
December 31,
(in millions)
Commercial
and industrial
 
Real estate
 
Financial
institutions
 
Governments &
 Agencies
 
Other
 
Total
retained loans
 
2018
2017
 
2018
2017
 
2018
2017
 
2018
2017
 
2018
2017
 
2018
 
2017
 
Impaired loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
With an allowance
$
807

$
1,170

 
$
107

$
78

 
$
4

$
93

 
$
—

$
—

 
$
152

$
168

 
$
1,070

 
$
1,509

 
Without an allowance(a)
140

228

 
27

60

 
—

—

 
—

—

 
13

70

 
180

 
358

 
Total impaired loans
$
947

$
1,398

 
$
134

$
138

 
$
4

$
93

 
$
—

$
—

 
$
165

$
238

 
$
1,250

(c) 
$
1,867

(c) 
Allowance for loan losses related to impaired loans
$
252

$
404

 
$
25

$
11

 
$
1

$
4

 
$
—

$
—

 
$
19

$
42

 
$
297

 
$
461

 
Unpaid principal balance of impaired loans(b)
1,043

1,604

 
203

201

 
4

94

 
—

—

 
473

255

 
1,723

 
2,154

 
(a)
When the discounted cash flows, collateral value or market price equals or exceeds the recorded investment in the loan, the loan does not require an allowance. This typically occurs when the impaired loans have been partially charged-off and/or there have been interest payments received and applied to the loan balance.
(b)
Represents the contractual amount of principal owed at December 31, 2018 and 2017. The unpaid principal balance differs from the impaired loan balances due to various factors, including charge-offs; interest payments received and applied to the carrying value; net deferred loan fees or costs; and unamortized discount or premiums on purchased loans.
(c)
Based upon the domicile of the borrower, largely consists of loans in the U.S.

The following table presents the Firm’s average impaired retained loans for the years ended 2018, 2017 and 2016.
Year ended December 31, (in millions)
2018
2017(b)
2016
Commercial and industrial
$
1,027

$
1,256

$
1,480

Real estate
133

165

217

Financial institutions
57

48

13

Governments & Agencies
—

—

—

Other
199

241

213

Total(a)
$
1,416

$
1,710

$
1,923

(a)
The related interest income on accruing impaired loans and interest income recognized on a cash basis were not material for the years ended December 31, 2018, 2017 and 2016.
(b)
The prior period amounts have been revised to conform with the current period presentation.
Certain loan modifications are considered to be TDRs as they provide various concessions to borrowers who are experiencing financial difficulty. All TDRs are reported as impaired loans in the tables above. TDRs were $576 million and $614 million as of December 31, 2018 and 2017, respectively. The impact of these modifications, as well as new TDRs, were not material to the Firm for the years ended December 31, 2018, 2017 and 2016.