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LENDING ACTIVITIES
 3 Months Ended
Mar. 31, 2022
LENDING ACTIVITIES  
LENDING ACTIVITIES

6. Lending Activities

 

The following table presents the composition of Mortgage and other loans receivable, net:

 

March 31,

 

December 31,

(in millions)

 

2022

 

2021

Commercial mortgages(a)

$

36,103

$

35,665

Residential mortgages

 

5,666

 

5,492

Life insurance policy loans

 

1,816

 

1,843

Commercial loans, other loans and notes receivable(b)

 

4,502

 

3,677

Total mortgage and other loans receivable

 

48,087

 

46,677

Allowance for credit losses(c)

 

(617)

 

(629)

Mortgage and other loans receivable, net

$

47,470

$

46,048

(a) Commercial mortgages primarily represent loans for apartments, offices and retail properties, with exposures in New York and California representing the largest geographic concentrations (aggregating approximately 19 percent and 10 percent, respectively, at March 31, 2022 and 21 percent and 10 percent, respectively, at December 31, 2021).

(b) Includes loans held for sale which are carried at lower of cost or market and are collateralized primarily by apartments. As of March 31, 2022 and December 31, 2021, the net carrying value of these loans were $105 million and $15 million, respectively.

(c)Does not include allowance for credit losses of $106 million and $71 million, respectively, at March 31, 2022 and December 31, 2021, in relation to off-balance-sheet commitments to fund commercial mortgage loans, which is recorded in Other liabilities.

 

Interest income is not accrued when payment of contractual principal and interest is not expected. Any cash received on impaired loans is generally recorded as a reduction of the current carrying amount of the loan. Accrual of interest income is generally resumed when delinquent contractual principal and interest is repaid or when a portion of the delinquent contractual payments are made and the ongoing required contractual payments have been made for an appropriate period. As of March 31, 2022, $12 million and $210 million of residential mortgage loans and commercial mortgage loans, respectively, were placed on nonaccrual status. As of December 31, 2021, $7 million and $226 million of residential mortgage loans and commercial mortgage loans, respectively, were placed on nonaccrual status.

Accrued interest is presented separately and is included in Accrued Investment Income on the Condensed Consolidated Balance Sheets. As of March 31, 2022, accrued interest receivable was $13 million and $127 million associated with residential mortgage loans and commercial mortgage loans, respectively. As of December 31, 2021, accrued interest receivable was $12 million and $126 million associated with residential mortgage loans and commercial mortgage loans, respectively.

A significant majority of commercial mortgages in the portfolio are non-recourse loans and, accordingly, the only guarantees are for specific items that are exceptions to the non-recourse provisions. It is therefore extremely rare for us to have cause to enforce the provisions of a guarantee on a commercial real estate or mortgage loan.

Nonperforming loans are generally those loans where payment of contractual principal or interest is more than 90 days past due. Nonperforming loans were not significant for any of the periods presented.

Credit Quality of Commercial Mortgages

The following table presents debt service coverage ratios(a) for commercial mortgages by year of vintage:

March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

2022

 

2021

 

2020

 

2019

 

2018

 

Prior

 

Total

>1.2X

$

1,573

$

2,294

$

1,667

$

5,061

$

3,882

$

13,760

$

28,237

1.00 - 1.20X

 

21

 

620

 

1,036

 

606

 

1,403

 

2,170

 

5,856

<1.00X

 

-

 

1

 

25

 

71

 

640

 

1,273

 

2,010

Total commercial mortgages

$

1,594

$

2,915

$

2,728

$

5,738

$

5,925

$

17,203

$

36,103

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

2021

 

2020

 

2019

 

2018

 

2017

 

Prior

 

Total

>1.2X

$

2,245

$

1,662

$

5,126

$

3,926

$

3,557

$

10,796

$

27,312

1.00 - 1.20X

 

574

 

1,019

 

700

 

1,138

 

136

 

1,929

 

5,496

<1.00X

 

1

 

27

 

71

 

925

 

41

 

1,792

 

2,857

Total commercial mortgages

$

2,820

$

2,708

$

5,897

$

5,989

$

3,734

$

14,517

$

35,665

The following table presents loan-to-value ratios(b) for commercial mortgages by year of vintage:

March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

2022

 

2021

 

2020

 

2019

 

2018

 

Prior

 

Total

Less than 65%

$

1,070

$

2,337

$

2,276

$

4,027

$

4,756

$

12,095

$

26,561

65% to 75%

 

524

 

371

 

426

 

1,711

 

1,139

 

3,503

 

7,674

76% to 80%

 

-

 

206

 

-

 

-

 

30

 

470

 

706

Greater than 80%

 

-

 

1

 

26

 

-

 

-

 

1,135

 

1,162

Total commercial mortgages

$

1,594

$

2,915

$

2,728

$

5,738

$

5,925

$

17,203

$

36,103

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

2021

 

2020

 

2019

 

2018

 

2017

 

Prior

 

Total

Less than 65%

$

2,286

$

2,272

$

4,149

$

4,815

$

2,892

$

9,902

$

26,316

65% to 75%

 

372

 

410

 

1,748

 

1,174

 

406

 

3,490

 

7,600

76% to 80%

 

-

 

-

 

-

 

-

 

188

 

274

 

462

Greater than 80%

 

162

 

26

 

-

 

-

 

248

 

851

 

1,287

Total commercial mortgages

$

2,820

$

2,708

$

5,897

$

5,989

$

3,734

$

14,517

$

35,665

(a) The debt service coverage ratio compares a property’s net operating income to its debt service payments, including principal and interest. Our weighted average debt service coverage ratio was 2.0X at March 31, 2022 and 1.9X at December 31, 2021. The debt service coverage ratios have been updated within the last three months. The debt service coverage ratios are updated when additional relevant information becomes available.

 

(b)The loan-to-value ratio compares the current unpaid principal balance of the loan to the estimated fair value of the underlying property collateralizing the loan. Our weighted average loan-to-value ratio was 57 percent at March 31, 2022 and was 57 percent at December 31, 2021. The loan-to-value ratios have been updated within the last three months.The following table presents the credit quality performance indicators for commercial mortgages:

 

Number

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent

 

 

of

 

Class

 

 

of

 

(dollars in millions)

Loans

 

Apartments

 

Offices

 

Retail

Industrial

 

Hotel

 

Others

 

Total

Total

 

March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit Quality Performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indicator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In good standing

627

 

$

13,760

$

9,592

$

4,945

$

4,554

$

2,084

$

420

$

35,355

98

%

Restructured(a)

10

 

 

-

 

353

 

140

 

-

 

137

 

-

 

630

2

 

90 days or less delinquent

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

-

 

>90 days delinquent or in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

process of foreclosure

3

 

 

-

 

67

 

51

 

-

 

-

 

-

 

118

-

 

Total(b)

640

 

$

13,760

$

10,012

$

5,136

$

4,554

$

2,221

$

420

$

36,103

100

%

Allowance for credit losses

 

 

$

101

$

227

$

106

$

56

$

33

$

10

$

533

1

%

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit Quality Performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indicator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In good standing

636

 

$

14,267

$

9,695

$

4,778

$

3,858

$

1,985

$

432

$

35,015

98

%

Restructured(a)

8

 

 

-

 

354

 

25

 

-

 

136

 

-

 

515

2

 

90 days or less delinquent

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

-

 

>90 days delinquent or in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

process of foreclosure

5

 

 

-

 

81

 

54

 

-

 

-

 

-

 

135

-

 

Total(b)

649

 

$

14,267

$

10,130

$

4,857

$

3,858

$

2,121

$

432

$

35,665

100

%

Allowance for credit losses

 

 

$

109

$

247

$

103

$

47

$

31

$

8

$

545

2

%

(a)Loans that have been modified in troubled debt restructurings and are performing according to their restructured terms. For additional discussion of troubled debt restructurings see Note 6 to the Consolidated Financial Statements in the 2021 Annual Report.

(b) Does not reflect allowance for credit losses.

The following table presents credit quality performance indicators for residential mortgages by year of vintage:

March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

2022

 

2021

 

2020

 

2019

 

2018

 

Prior

 

Total

FICO*:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

780 and greater

$

93

$

2,307

$

693

$

255

$

95

$

631

$

4,074

720 - 779

 

90

 

763

 

179

 

85

 

34

 

191

 

1,342

660 - 719

 

1

 

84

 

30

 

18

 

11

 

69

 

213

600 - 659

 

-

 

4

 

2

 

3

 

2

 

17

 

28

Less than 600

 

-

 

-

 

-

 

1

 

-

 

8

 

9

Total residential mortgages

$

184

$

3,158

$

904

$

362

$

142

$

916

$

5,666

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

2021

 

2020

 

2019

 

2018

 

2017

 

Prior

 

Total

FICO*:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

780 and greater

$

1,601

$

691

$

297

$

107

$

192

$

501

$

3,389

720 - 779

 

1,306

 

230

 

86

 

44

 

58

 

154

 

1,878

660 - 719

 

48

 

42

 

22

 

12

 

20

 

49

 

193

600 - 659

 

1

 

1

 

2

 

3

 

2

 

12

 

21

Less than 600

 

-

 

-

 

1

 

1

 

2

 

7

 

11

Total residential mortgages

$

2,956

$

964

$

408

$

167

$

274

$

723

$

5,492

*Fair Isaac Corporation (FICO) is the credit quality indicator used to evaluate consumer credit risk for residential mortgage loan borrowers and have been updated within the last twelve months.

Methodology Used to Estimate the Allowance for Credit Losses

For a discussion of our accounting policy for evaluating Mortgage and other loans receivable for impairment see Note 6 to the Consolidated Financial Statements in the 2021 Annual Report.

The following table presents a rollforward of the changes in the allowance for credit losses on Mortgage and other loans receivable(a):

Three Months Ended March 31,

 

 

2022

 

2021

 

 

 

 

 

Commercial

 

Other

 

 

 

 

Commercial

 

Other

 

 

(in millions)

 

 

 

 

Mortgages

 

Loans

 

Total

 

 

Mortgages

 

Loans

 

Total

Allowance, beginning of year

 

 

 

$

545

$

84

$

629

 

$

685

$

129

$

814

Loans charged off

 

 

 

 

(4)

 

-

 

(4)

 

 

-

 

-

 

-

Net charge-offs

 

 

 

 

(4)

 

-

 

(4)

 

 

-

 

-

 

-

Addition to (release of) allowance for loan losses

 

 

 

(8)

 

-

 

(8)

 

 

(23)

 

(4)

 

(27)

Allowance, end of period

 

 

 

$

533

$

84

$

617

 

$

662

$

125

$

787

(a)Does not include allowance for credit losses of $106 million and $70 million, respectively, at March 31, 2022 and 2021 in relation to off-balance-sheet commitments to fund commercial mortgage loans, which is recorded in Other liabilities.

Our expectations and models used to estimate the allowance for losses on commercial and residential mortgage loans are regularly updated to reflect the current economic environment. The full impact of COVID-19 on real estate valuations remains uncertain and we will continue to review our valuations as further information becomes available.

TROUBLED DEBT RESTRUCTURINGS

We modify loans to optimize their returns and improve their collectability, among other things. When we undertake such a modification with a borrower that is experiencing financial difficulty and the modification involves us granting a concession to the troubled debtor, the modification is a troubled debt restructuring (TDR). We assess whether a borrower is experiencing financial difficulty based on a variety of factors, including the borrower’s current default on any of its outstanding debt, the probability of a default on any of its debt in the foreseeable future without the modification, the insufficiency of the borrower’s forecasted cash flows to service any of its outstanding debt (including both principal and interest), and the borrower’s inability to access alternative third-party financing at an interest rate that would be reflective of current market conditions for a non-troubled debtor. Concessions granted may include extended maturity dates, interest rate changes, principal or interest forgiveness, payment deferrals and easing of loan covenants.

During the three-month periods ended March 31, 2022 and 2021, loans with a carrying value of $115 million and $46 million, respectively, were modified in TDRs.