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Receivables Held for Sale
 12 Months Ended
Dec. 31, 2015
Receivables [Abstract]  
Receivables Held for Sale
Receivables Held for Sale
 
Real Estate Secured Receivables Real estate secured receivables held for sale which are carried at the lower of amortized cost or fair value are comprised of the following:
 
December 31, 2015
 
December 31, 2014
 
(in millions)
Real estate secured receivables held for sale:
 
 
 
First lien
$
8,110

 
$
860

Second lien
155

 
—

Total real estate secured receivables held for sale
$
8,265

 
$
860


During the second quarter of 2013, we established an on-going receivable sales program under which we transfer to receivables held for sale first lien real estate secured receivables held for investment when a receivable meeting pre-determined criteria 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 (generally 180 days past due). In June 2015, we expanded this receivable sales program to include substantially all of our first lien real estate secured receivables held for investment which have been either re-aged, modified or subject to a bankruptcy filing since 2007, along with any second lien balances associated with these receivables. Under our expanded receivable sales program, we continue to transfer substantially all real estate secured receivables to held for sale when either of the above criteria are met.
Under our expanded sales program, during 2015 we transferred real estate secured receivables to held for sale with a total unpaid principal balance (excluding accrued interest) of approximately $11,796 million at the time of transfer. The carrying value of these receivables prior to transfer after considering the fair value of the property less cost to sell, as applicable, was approximately $12,183 million, including accrued interest. As we plan to sell these receivables to third party investors, fair value represents the price we believe a third party investor would pay to acquire the receivable portfolios. During 2015, we recorded an initial lower of amortized cost or fair value adjustment of $234 million associated with the newly transferred loans all of which was attributed to credit factors and recorded as a component of the provision for credit losses in the consolidated statement of income (loss).
During 2015, we recorded $129 million of additional lower of amortized cost or fair value adjustment on receivables held for sale as a component of total other revenues in the consolidated statement of income (loss) as a result of a change in the estimated pricing on specific pools of loans.
During 2014 and 2013, we transferred real estate secured receivables to held for sale with an unpaid principal balance (excluding accrued interest) of approximately $1,390 million and $3,612 million, respectively, at the time of transfer. The carrying value of these receivables prior to transfer after considering the fair value of the property less cost to sell was approximately $1,080 million and $2,506 million, including accrued interest, during 2014 and 2013, respectively. During 2014 and 2013, fair value adjustment of $113 million and $212 million, respectively, associated with the newly transferred loans, all of which was attributable to non-credit related factors and recorded as a component of total other revenues in the consolidated statement of income (loss). These receivables were already carried at the lower of amortized cost or fair value of the collateral less cost to sell.
During 2014 and 2013, we reversed $322 million and $686 million, respectively, of the lower of amortized cost or fair value adjustment previously recorded primarily due to an increase in the fair value of the real estate secured receivables held for sale as conditions in the housing industry showed improvement during 2014 and 2013 due to improvements in property values as well as lower required market yields and increased investor demand for these types of receivables.
During 2015, we sold real estate secured receivables with an aggregate unpaid principal balance of $2,591 million (aggregate carrying value of $1,995 million including accrued interest) at the time of sale to third-party investors which included $1,986 million (aggregate carrying value of $1,587 million) that was sold during the fourth quarter of 2015. Aggregate cash consideration for these real estate secured receivables totaled $2,022 million. We realized a gain on these transactions of approximately $12 million, net of transaction costs.
During 2014, we sold real estate secured receivables with an aggregate unpaid principal balance of $2,927 million (aggregate carrying value of $2,152 million including accrued interest) at the time of sale to a third-party investor. Aggregate cash consideration for these real estate secured receivables totaled $2,242 million. We realized a gain on these transactions of approximately $63 million, net of transaction costs.
During 2013, we sold real estate secured receivables with an aggregate unpaid principal balance of $5,685 million (aggregate carrying value of $3,127 million including accrued interest) at the time of sale to a third-party investor. Aggregate cash consideration for these real estate secured receivables totaled $3,131 million. We realized a loss on these transactions of approximately $89 million, net of transaction costs.
Historically, receivables held for sale have been sold to investors or, if the foreclosure process is completed prior to sale, the underlying properties acquired in satisfaction of the receivables have been classified as REO and sold. As we continue to work with borrowers, we have also historically agreed to short sales whereby the property is sold by the borrower at a price which has been pre-negotiated with us and the borrower is released from further obligation. Accordingly, based on the projected timing of loan sales and the expected flow of foreclosure volume into REO or settled through a short sale, a portion of the real estate secured receivables classified as held for sale will ultimately become REO or settled through a short sale. As a result, a portion of the non-credit fair value adjustment on receivables held for sale may be reversed in earnings over time. The following table summarizes the activity of real estate secured receivables either transferred to REO or for which the underlying collateral was sold in a short sale during 2015, 2014 and 2013.
Year Ended December 31,
2015
 
2014
 
2013
 
(in millions)
Carrying value of real estate secured receivables:
 
 
 
 
 
Transferred to REO after obtaining title to the underlying collateral
$
93

 
$
182

 
$
529

Underlying collateral sold in a short sale
55

 
61

 
182

Impact to lower of amortized cost or fair value adjustment previously recorded resulting from the transfer to REO or short sales - (income) expense:
 
 
 
 
 
Transferred to REO after obtaining title to the underlying collateral
(1
)
 
5

 
(40
)
Underlying collateral sold in a short sale
2

 
3

 
(22
)

Personal Non-Credit Card Receivables In 2013, we completed the sale of our personal non-credit card receivable portfolio with an aggregate unpaid principal balance of $3,760 million (aggregate carrying value of $2,947 million) at March 31, 2013 to trusts for which affiliates of Springleaf Finance, Inc. ("Springleaf"), Newcastle Investment Corp. and Blackstone Tactical Opportunities Advisors L.L.C. are the sole beneficiaries (collectively, the "Purchasers"). Total cash consideration received was $2,964 million. During 2013, we recorded a loss on sale of $11 million primarily related to transaction fees. On September 1, 2013, we completed the sale of a loan servicing facility and related assets located in London, Kentucky (the "Facility") to Springleaf and recognized an immaterial gain on sale of the Facility during 2013. Additionally, on September 1, 2013 the personal non-credit card receivables were converted onto the Purchasers' system and we transferred to the Purchasers over 200 employees who had performed servicing activities for these and other receivables. Prior to the conversion of these receivable to the Purchaser's systems, we serviced these personal non-credit card receivables for the Purchasers for a fee. Servicing fee revenues recorded for servicing these personal non-credit card receivables during 2013 totaled $28 million.

Receivable Held for Sale Activity During the Period The following table summarizes the activity in receivables held for sale during 2015, 2014 and 2013:
 
Real Estate Secured
 
Personal Non-Credit Card
 
Total Receivables Held for Sale
 
(in millions)
Year Ended December 31, 2015:
 
 
 
 
 
Real estate secured receivables held for sale at beginning of period
$
860

 
$
—

 
$
860

Transfer of real estate secured receivables into held for sale at the lower of amortized cost or fair value(1)(2)
10,327

 
—

 
10,327

Real estate secured receivable sales
(1,995
)
 
—

 
(1,995
)
Lower of amortized cost or fair value adjustment on real estate secured receivables held for sale
(130
)
 
—

 
(130
)
Carrying value of real estate secured receivables held for sale settled through short sale or transfer to REO
(148
)
 
—

 
(148
)
Change in real estate secured receivable balance, including collections
(649
)
 
—

 
(649
)
Real estate secured receivables held for sale at end of period(3)
$
8,265

 
$
—

 
$
8,265

 
 
 
 
 
 
Year Ended December 31, 2014:
 
 
 
 
 
Real estate secured receivables held for sale at beginning of period
$
2,047

 
$
—

 
$
2,047

Transfer of real estate secured receivables into held for sale at the lower of amortized cost or fair value(1)(2)
909

 
—

 
909

Real estate secured receivable sales
(2,152
)
 
—

 
(2,152
)
Lower of amortized cost or fair value adjustment on real estate secured receivables held for sale
314

 
—

 
314

Carrying value of real estate secured receivables held for sale settled through short sale or transfer to REO
(243
)
 
—

 
(243
)
Change in real estate secured receivable balance, including collections
30

 
—

 
30

Transfer of real estate secured receivables into held for investment at the lower of amortized cost or fair value(4)
(45
)
 
 
 
(45
)
Real estate secured receivables held for sale at end of period(3)
$
860

 
$
—

 
$
860

 
 
 
 
 
 
Year Ended December 31, 2013:
 
 
 
 
 
Receivables held for sale at beginning of period
$
3,022

 
$
3,181

 
$
6,203

Transfer of real estate secured receivables into held for sale at the lower of amortized cost or fair value(1)(2)
2,130

 
—

 
2,130

Receivable sales:
 
 
 
 
 
First lien real estate secured
(3,127
)
 
—

 
(3,127
)
Personal non-credit card receivables
—

 
(2,947
)
 
(2,947
)
Lower of amortized cost or fair value adjustment on receivables held for sale
830

 
(82
)
 
748

Carrying value of real estate secured receivables held for sale settled through short sale or transfer to REO
(711
)
 
—

 
(711
)
Change in receivable balance, including collections
(97
)
 
(152
)
 
(249
)
Receivables held for sale at end of period(3)
$
2,047

 
$
—

 
$
2,047

 
(1) 
The initial lower of amortized cost or fair value adjustment on receivables transferred into held for sale during 2015 totaled $234 million compared with $113 million during 2014 and $212 million during 2013.
(2) 
Amount includes any accrued interest associated with the receivable.
(3) 
Real estate secured receivables held for sale in the table above are presented net of the valuation allowance.
(4) 
During the first quarter of 2014, we identified a small number of receivables held for sale which did not meet our criteria to be classified as held for sale. As a result we transferred these receivables to held for investment at the lower of amortized cost or fair value.
The following table provides a rollforward of our valuation allowance for 2015, 2014 and 2013. See Note 20, "Fair Value Measurements," for a discussion of the factors impacting the fair value of these receivables.
Year Ended December 31,
2015
 
2014
 
2013
 
(in millions)
Balance at beginning of period
$
—

 
$
329

 
$
1,452

Initial valuation allowance for real estate secured receivables transferred to held for sale during the period
—

 
113

 
212

Increase in (release of) valuation allowance resulting from changes in fair value
130

 
(314
)
 
(748
)
Valuation allowance on real estate secured receivables transferred to held for investment
—

 
(10
)
 
—

Change in valuation allowance for loans sold
(144
)
 
149

 
(183
)
Change in valuation allowance for collections, charged-off, transferred to REO or short sale
27

 
(267
)
 
(404
)
Balance at end of period
$
13

 
$
—

 
$
329


The following table summarizes the components of the lower of amortized cost or fair value adjustment during 2015, 2014 and 2013:
 
Lower of Amortized Cost or Fair Value Adjustments Associated With
 
 
 
Fair Value
 
REO
 
Short Sales
 
Total
 
(in millions)
(Income)/Expense:
 
 
 
 
 
 
 
Year Ended December 31, 2015:
 
 
 
 
 
 
 
Lower of amortized cost or fair value adjustments recorded as a component of:
 
 
 
 
 
 
 
Provision for credit losses(1)
$
234

 
$
—

 
$
—

 
$
234

Other revenues:
 
 
 
 
 
 
 
Initial lower of amortized cost or fair value adjustment(2)
—

 
—

 
—

 
—

Subsequent to initial transfer to held for sale
129

 
(1
)
 
2

 
130

Lower of amortized cost or fair value adjustment recorded through other revenues
129

 
(1
)
 
2

 
130

Lower of amortized cost or fair value adjustment
$
363

 
$
(1
)
 
$
2

 
$
364

 
 
 
 
 
 
 
 
Year Ended December 31, 2014:
 
 
 
 
 
 
 
Lower of amortized cost or fair value adjustments recorded as a component of other revenues:
 
 
 
 
 
 
 
Initial lower of amortized cost or fair value adjustment(2)
$
113

 
$
—

 
$
—

 
$
113

Subsequent to initial transfer to held for sale
(322
)
 
5

 
3

 
(314
)
Lower of amortized cost or fair value adjustment recorded through other revenues(3)
$
(209
)
 
$
5

 
$
3

 
$
(201
)
 
 
 
 
 
 
 
 
Year Ended December 31, 2013:
 
 
 
 
 
 
 
Lower of amortized cost or fair value adjustment recorded as other revenues:
 
 
 
 
 
 
 
Initial lower of amortized cost or fair value adjustment(2)
$
212

 
$
—

 
$
—

 
$
212

Subsequent to initial transfer to held for sale
(686
)
 
(40
)
 
(22
)
 
(748
)
Lower of amortized cost or fair value adjustment recorded through other revenues(3)
$
(474
)
 
$
(40
)
 
$
(22
)
 
$
(536
)
 

(1) 
The portion of the initial lower of amortized cost or fair value adjustment attributable to credit factors was recorded as provision for credit losses in the consolidated statement of income (loss). This portion of the initial lower of amortized cost or fair value adjustment was attributed to credit factors as there was no objective, verifiable evidence to indicate non-credit factors were associated with the decline in fair value.
(2) 
The portion of the initial lower of amortized cost or fair value adjustment which reflects the impact on value caused by current marketplace conditions including changes in interest rates was recorded as a component of total other revenues in the consolidated statement income (loss).
(3) 
During 2014 and 2013, no initial lower of amortized cost or fair value adjustment was attributed to credit factors and recorded as a provision for credit losses. The entire adjustment was attributable to non-credit related factors as these receivables were already carried at the lower of amortized cost or fair value of the collateral less cost to sell.
See Note 20, "Fair Value Measurements," for information concerning the fair value of receivables held for sale.