Receivables

Receivables consisted of the following:



	December 31, 2013			December 31, 2012
	(in millions)
Real estate secured:
First lien	$	23,568		$	29,301
Second lien	3,016			3,638
Total real estate secured receivables	26,584			32,939
Accrued finance income and other	862			952
Credit loss reserve for receivables	(3,273		)	(4,607		)
Total receivables, net	$	24,173		$	29,284

Deferred origination fees, net of costs, totaled $183 million and $221 million at December 31, 2013 and December 31, 2012, respectively, and are included in the receivable balance. Net unamortized premium on our receivables totaled $102 million and $127 million at December 31, 2013 and December 31, 2012, respectively.

Collateralized funding transactions Secured financings previously issued under public trusts with a balance of $2,200 million at December 31, 2013 are secured by $4,020 million of closed-end real estate secured receivables. Secured financings previously issued under public trusts with a balance of $2,878 million at December 31, 2012 were secured by $4,898 million of closed-end real estate secured receivables.

Age Analysis of Past Due Receivables The following tables summarize the past due status of our receivables at December 31, 2013 and December 31, 2012. The aging of past due amounts is determined based on the contractual delinquency status of payments made under the receivable. An account is generally considered to be contractually delinquent when payments have not been made in accordance with the loan terms. Delinquency status is affected by customer account management policies and practices such as re-age.



	Past Due				Total Past Due				Total Receivables⁽²⁾
December 31, 2013	30 – 89 days		90+ days		Total Past Due		Current⁽¹⁾		Total Receivables⁽²⁾
	(in millions)
Real estate secured:
First lien	$	2,462	$	1,538	$	4,000	$	19,568	$	23,568
Second lien	249		192		441		2,575		3,016
Total real estate secured receivables⁽³⁾	$	2,711	$	1,730	$	4,441	$	22,143	$	26,584



	Past Due				Total Past Due				Total Receivables⁽²⁾
December 31, 2012	30 – 89 days		90+ days		Total Past Due		Current⁽¹⁾		Total Receivables⁽²⁾
	(in millions)
Real estate secured:
First lien	$	2,759	$	2,748	$	5,507	$	23,794	$	29,301
Second lien	316		239		555		3,083		3,638
Total real estate secured receivables⁽³⁾	$	3,075	$	2,987	$	6,062	$	26,877	$	32,939


⁽¹⁾	Receivables less than 30 days past due are presented as current.

⁽²⁾

The receivable balances included in this table reflects the principal amount outstanding on the loan and certain basis adjustments to the loan such as deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. However, these basis adjustments on the loans are excluded in other presentations of dollars of two-months-and-over contractual delinquency and nonperforming receivable account balances.


⁽³⁾	Our real estate secured receivables have historically been maintained on two mortgage loan servicing platforms which resulted in differences relating to how contractual delinquency was determined. In April 2013, we moved all closed-end real estate secured receivables onto one platform which resulted in the substantial majority of our real estate secured receivables utilizing the same platform.

Contractual maturities Contractual maturities of our receivables were as follows:



	2014		2015		2016		2017		2018		Thereafter		Total
	(in millions)
Real estate secured:
First lien	$	111	$	42	$	72	$	99	$	117	$	23,127	$	23,568
Second lien	86		13		27		30		28		2,832		3,016
Total real estate secured receivables	$	197	$	55	$	99	$	129	$	145	$	25,959	$	26,584

As a substantial portion of consumer receivables, based on our experience, will be repaid prior to contractual maturity, the above maturity schedule should not be regarded as a forecast of future cash collections.

The following table summarizes contractual maturities of receivables due after one year by repricing characteristic:



At December 31, 2013	Over 1 But Within 5 Years		Over 5 Years
	(in millions)
Receivables at predetermined interest rates	$	415	$	23,979
Receivables at floating or adjustable rates	13		1,980
Total	$	428	$	25,959

Nonaccrual receivables Nonaccrual consumer receivables and nonaccrual receivables held for sale are all receivables which are 90 or more days contractually delinquent as well as second lien loans (regardless of delinquency status) where the first lien loan that we own or service is 90 or more days contractually delinquent. Nonaccrual receivables do not include receivables which have made qualifying payments and have been re-aged such that the contractual delinquency status has been reset to current. If a re-aged loan subsequently experiences payment default and becomes 90 or more days contractually delinquent, it will be reported as nonaccrual. Nonaccrual receivables and nonaccrual receivables held for sale consisted of the following:



	December 31, 2013		December 31, 2012
	(in millions)
Nonaccrual receivable portfolios:
Real estate secured⁽¹⁾	$	1,769	$	3,032
Receivables held for sale⁽²⁾	1,422		2,161
Total nonaccrual receivables⁽³⁾	$	3,191	$	5,193


⁽¹⁾	At December 31, 2013 and December 31, 2012, nonaccrual real estate secured receivables held for investment include $639 million and $1,748 million, respectively, of receivables that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.

⁽²⁾

For a discussion of the movements between the components of nonaccrual receivables, see Note 7, "Receivables Held for Sale," which includes discussion of the transfer of real estate secured receivables that were carried at the lower of amortized cost or fair value of the collateral less cost to sell to held for sale during the second quarter of 2012 as well as discussion regarding the formal program introduced in the second quarter of 2013 to transfer receivables (meeting pre-determined criteria) to held for sale when the receivable is written down to the lower of amortized cost or fair value of the collateral less cost to sell in accordance with our existing charge-off policies.


⁽³⁾	Non-accrual receivables do not include receivables totaling $953 million and $1,497 million at December 31, 2013 and December 31, 2012, respectively, which have been written down to the lower of amortized cost or fair value of the collateral less cost to sell which are less than 90 days contractually delinquent and not accruing interest.

The following table provides additional information on our total nonaccrual receivables:



Year Ended December 31,	2013		2012		2011
	(in millions)
Interest income that would have been recorded if the nonaccrual receivable had been current in accordance with contractual terms during the period	$	819	$	1,100	$	1,161
Interest income that was recorded on nonaccrual receivables included in interest income on nonaccrual loans during the period	216		331		462

Troubled Debt Restructurings TDR Loans represent receivables for which the original contractual terms have been modified to provide for terms that are at less than a market rate of interest for new receivables because of deterioration in the borrower’s financial status.

Modifications for real estate secured and personal non-credit card receivables may include changes to one or more terms of the loan, including, but not limited to, a change in interest rate, an extension of the amortization period, a reduction in payment amount and partial forgiveness or deferment of principal. A substantial amount of our modifications involve interest rate reductions which lower the amount of finance income we are contractually entitled to receive for a period of time in future periods. By lowering the interest rate and making other changes to the loan terms, we believe we are able to increase the amount of cash flow that will ultimately be collected from the loan, given the borrower's financial condition. Re-aging is an account management action that results in the resetting of the contractual delinquency status of an account to current which generally requires the receipt of two qualifying payments. TDR Loans are reserved for based on the present value of expected future cash flows discounted at the loans' original effective interest rate which generally results in a higher reserve requirement for these loans. The portion of the credit loss reserves on TDR Loans that is associated with the discounting of cash flows is released from credit loss reserves over the life of the TDR Loan.

During 2012, we evaluated recently issued regulatory guidance requiring receivables discharged under Chapter 7 bankruptcy and not re-affirmed to be classified as TDR Loan balances and made the decision to classify these receivables as TDR Loans which resulted in an increase in TDR Loans of $1,018 million at December 31, 2012, of which 37 percent had been carried at the lower of amortized cost or fair value of the collateral less cost to sell. Excluding the receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell, these receivables are now reserved for using a discounted cash flow analysis which resulted in an increase in credit loss reserves during 2012 of approximately $40 million. For the receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell, there was no change in the reserves.

During the third quarter of 2011 we adopted an Accounting Standards Update which provided additional guidance to determine whether a restructuring of a receivable meets the criteria to be considered a TDR Loan. Under this new guidance, we determined that substantially all receivables modified as a result of a financial difficulty, regardless of whether the modification was permanent or temporary, including all modifications with trial periods, should be reported as TDR Loans. Additionally, we determined that all re-ages, except first time early stage delinquency re-ages where the customer has not been granted a prior re-age or modification since the first quarter of 2007, should be considered TDR Loans, as we believe that multiple or later stage delinquency re-ages or a need for a modification to any of the loan terms other than to provide a market rate of interest provides evidence the borrower is experiencing financial difficulty and a concession has been granted that is more than insignificant. As required, the new guidance was applied retrospectively to restructurings occurring on or after January 1, 2011 and resulted in the reporting of an additional $4,068 million of real estate secured receivables and an additional $717 million of personal non-credit card receivables as TDR Loans during the third quarter of 2011 with credit loss reserves of $1,308 million associated with these receivables at September 30, 2011.

The following summarizes the drivers of the additional TDR Loans reported as a result of the Accounting Standards Update:



New TDR Loan Volume Upon Adoption of New Accounting Standards Update	2011
	(in billions)
Interest rate loan modifications less than 12 months in duration during January 1, 2011 through September 30, 2011	$	1.4
Trial modifications during January 1, 2011 through September 30, 2011	.2
Re-ages during January 1, 2011 through September 30, 2011, excluding first-time early stage delinquency re-ages	3.2
Total	$	4.8

An incremental loan loss provision for these receivables using a discounted cash flow analysis of approximately $925 million was recorded during the third quarter of 2011. This discounted cash flow analysis, in addition to considering all expected future cash flows, also takes into consideration the time value of money and the difference between the current interest rate and the original effective interest rate on the loan. This methodology generally results in a higher reserve requirement for TDR Loans than loans for which credit loss reserves are established using a roll rate migration analysis that only considers incurred credit losses. The TDR Loan balances and related credit loss reserves for consumer receivables reported as of December 31, 2010 use our previous definition of TDR Loans and as such, are not directly comparable to the current period balances.

Prior to the adoption of the Accounting Standards Update, we did not view re-ages or temporary rate reductions (generally less than 12 months) as TDR Loans. We considered paragraph 5(c) of FASB Statement No. 15, “Accounting by Debtors and Creditors for Troubled Debt Restructurings” (“FAS 15”), codified in paragraph 15-9(c) of Accounting Standards Codification (“ASC”) Subtopic 310-40, “Troubled Debt Restructurings by Creditors,” which provides guidance on when the modification of the terms of a loan contract represents a concession that may result in a modification qualifying as a TDR Loan (the other criterion being the borrower experiencing financial difficulty). In applying paragraph 5(c) of FAS 15 or paragraph 15-9(c) of ASC Subtopic 310-40, we focused on whether re-ages or modifications resulted in reducing the interest rate on the loan for its remaining life. Accordingly, under our previous policy, although such concessions were an indication that the borrower was experiencing financial difficulty, we considered re-ages and temporary rate reductions (generally less than 12 months) granted to help borrowers overcome an unexpected financial difficulty not to be concessions. However, we viewed loans for which we granted a 12-month or longer or two or more consecutive six-month interest modifications as permanent modifications and, accordingly, concessions. Applying the clarifications in the Accounting Standards Update, including the examples in the implementation guidance, caused us to conclude that interest rate modifications of less than 12-months and re-ages (other than first-time early stage delinquency re-ages) were concessions to borrowers experiencing financial difficulty that were not insignificant and should be reported as TDR Loans.

The following table presents information about receivables and receivables held for sale which as a result of any account management action taken during the year ended December 31, 2013, 2012 and 2011 became classified as TDR Loans.



Year Ended December 31,	2013		2012		2011
	(in millions)
Real estate secured:
First lien	$	1,358	$	2,871	$	6,145
Second lien	166		329		625
Real estate secured receivables held for sale	298		364		—
Total real estate secured	1,822		3,564		6,770
Personal non-credit card receivables held for sale^{( 1)}	28		294		—
Personal non-credit card receivables held for investment	—		—		1,058
Total⁽²⁾	$	1,850	$	3,858	$	7,828


⁽¹⁾	As discussed more fully in Note 7, "Receivables Held for Sale," we sold our personal non-credit card receivable portfolio on April 1, 2013.


⁽²⁾	The following table summarizes the actions taken during the year ended December 31, 2013, 2012 and 2011 which resulted in the above receivables being classified as a TDR Loan.



Year Ended December 31,	2013		2012		2011
	(in millions)
Interest rate modification	$	692	$	1,814	$	3,630
Re-age of past due account	1,158		2,044		4,198
Total	$	1,850	$	3,858	$	7,828

Receivables and receivables held for sale reported as TDR Loans consisted of the following:



	December 31, 2013		December 31, 2012
	(in millions)
TDR Loans:⁽¹⁾⁽²⁾
Real estate secured:
First lien⁽⁴⁾	$	10,633	$	12,671
Second lien⁽⁴⁾	1,047		1,205
Real estate secured receivables held for sale⁽³⁾	1,392		1,936
Total real estate secured	13,072		15,812
Personal non-credit card receivables held for sale⁽³⁾⁽⁶⁾	—		592
Total TDR Loans	$	13,072	$	16,404

Credit loss reserves for TDR Loans:
Real estate secured:
First lien	$	2,294	$	3,104
Second lien	360		523
Total credit loss reserves for real estate secured TDR Loans⁽³⁾⁽⁵⁾	$	2,654	$	3,627


⁽¹⁾	TDR Loans are considered to be impaired loans regardless of accrual status.

⁽²⁾

The TDR Loan balances included in the table above reflect the current carrying amount of TDR Loans and includes all basis adjustments on the loan, such as unearned income, unamortized deferred fees and costs on originated loans and premiums or discounts on purchased loans as well as any charge-off recorded in accordance with our existing charge-off policies. Additionally, the carrying amount of TDR Loans classified as held for sale has been reduced by both the lower of amortized cost or fair value adjustment as well as the credit loss reserves associated with these receivables prior to the transfer. The following table reflects the unpaid principal balance of TDR Loans:



	December 31, 2013		December 31, 2012
	(in millions)
Real estate secured:
First lien	$	10,983	$	13,569
Second lien	1,188		1,315
Real estate secured receivables held for sale	2,587		4,912
Total real estate secured	14,758		19,796
Personal non-credit card receivables held for sale	—		1,139
Total TDR Loans	$	14,758	$	20,935

At December 31, 2013, the unpaid principal balances reflected above include $92 million which has received a reduction in the unpaid principal balance as part of an account management action.


⁽³⁾	There are no credit loss reserves associated with receivables classified as held for sale as they are carried at the lower of amortized cost or fair value.


⁽⁴⁾	At December 31, 2013 and December 31, 2012, TDR Loans held for investment totaling $604 million and $1,488 million, respectively, are recorded at the lower of amortized cost or fair value of the collateral less cost to sell.


⁽⁵⁾	Included in credit loss reserves.


⁽⁶⁾	As discussed more fully in Note 7, "Receivables Held for Sale," we sold our personal non-credit card receivable portfolio on April 1, 2013.

The following table discloses receivables and receivables held for sale which were classified as TDR Loans during the previous 12 months which subsequently became sixty days or greater contractually delinquent during the year ended December 31, 2013, 2012 and 2011.



Year Ended December 31,	2013		2012		2011
	(in millions)
Real estate secured:
First lien	$	765	$	1,837	$	1,941
Second lien	116		259		189
Real estate secured receivables held for sale	342		365		—
Total real estate secured	1,223		2,461		2,130
Personal non-credit card receivables held for sale	21		262		—
Personal non-credit card receivables held for investment	—		—		418
Total	$	1,244	$	2,723	$	2,548

The volume of TDR Loans which were classified as TDR Loans during the previous 12 months and became sixty days or greater contractually delinquent during 2013 decreased as a result of the lower new TDR Loan volumes as compared with the prior year.

The following table provides additional information relating to TDR Loans, including TDR Loans held for sale:



Year Ended December 31,	2013		2012		2011
	(in millions)
Average balance of TDR Loans:
Real estate secured:
First lien	$	14,430	$	14,657	$	11,450
Second lien	1,136		1,219		901
Total real estate secured	15,566		15,876		12,351
Personal non-credit card	144		925		1,161
Total average balance of TDR Loans	$	15,710	$	16,801	$	13,512
Interest income recognized on TDR Loans:
Real estate secured:
First lien	$	927	$	871	$	590
Second lien	108		104		62
Total real estate secured	1,035		975		652
Personal non-credit card	40		174		133
Total interest income recognized on TDR Loans	$	1,075	$	1,149	$	785

Consumer Receivable Credit Quality Indicators Credit quality indicators used for consumer receivables include a loan’s delinquency status, whether the loan is performing and whether the loan is a TDR Loan.

Delinquency The following table summarizes dollars of two-months-and-over contractual delinquency and as a percent of total receivables and receivables held for sale (“delinquency ratio”) for our loan portfolio:



	December 31, 2013				December 31, 2012
	Dollars of Delinquency		Delinquency Ratio		Dollars of Delinquency		Delinquency Ratio
	(dollars are in millions)
Real estate secured:
First lien	$	2,387	10.13	%	$	3,645	12.44	%
Second lien	275		9.12		349		9.59
Real estate secured receivables held for sale	1,473		71.96		2,176		72.01
Total real estate secured	4,135		14.44		6,170		17.16
Personal non-credit card receivables held for sale	—		—		103		3.24
Total	$	4,135	14.44	%	$	6,273	16.03	%

Nonperforming The following table summarizes the status of receivables and receivables held for sale:



	Accruing Loans		Nonaccrual Loans⁽³⁾		Total
	(in millions)
At December 31, 2013
Real estate secured⁽¹⁾⁽²⁾	$	24,815	$	1,769	$	26,584
Receivables held for sale	625		1,422		2,047
Total	$	25,440	$	3,191	$	28,631
At December 31, 2012
Real estate secured⁽¹⁾⁽²⁾	$	29,907	$	3,032	$	32,939
Receivables held for sale	4,042		2,161		6,203
Total	$	33,949	$	5,193	$	39,142


⁽¹⁾	At December 31, 2013 and December 31, 2012, nonaccrual real estate secured receivables held for investment include $639 million and $1,748 million, respectively, of receivables that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.


⁽²⁾	At December 31, 2013 and December 31, 2012, nonaccrual real estate secured receivables held for investment include $1,245 million and $2,096 million, respectively, of TDR Loans, some of which may also be carried at fair value of the collateral less cost to sell.


⁽³⁾	Nonaccrual loans do not include receivables totaling $953 million and $1,497 million at December 31, 2013 and December 31, 2012, respectively, which have been written down to the lower of amortized cost or fair value of the collateral less cost to sell which are less than 90 days contractually delinquent and not accruing interest.

Troubled debt restructurings See discussion of TDR Loans above for further details on this credit quality indicator.