Note 7 – Other noninterest revenue Investment banking fees This revenue category includes advisory and equity and debt underwriting fees.
Advisory fees are recognized as revenue when the related services have been performed.
Underwriting fees are recognized as revenue when the Firm has rendered all services to the issuer and is entitled to collect the fee from the issuer, as long as there are no other contingencies associated with the fee (e. g. , the fee is not contingent upon the customer obtaining financing).
Underwriting fees are net of syndicate expense.
The Firm recognizes credit arrangement and syndication fees as revenue after satisfying certain retention, timing and yield criteria.
The following table presents the components of Investment banking fees.
## Table 0 ##
Lending & deposit-related fees This revenue category includes fees from loan commitments, standby letters of credit, financial guarantees, deposit-related fees in lieu of compensating balances, cash management-related activities or transactions, deposit accounts and other loan servicing activities.
These fees are recognized over the period in which the related service is provided.
Asset management, administration and commissions This revenue category includes fees from investment management and related services, custody, brokerage services, insurance premiums and commissions and other products.
These fees are recognized over the period in which the related service is provided.
Performancebased fees, which are earned based upon exceeding certain benchmarks or other performance targets, are accrued and recognized at the end of the performance period in which the target is met.
Mortgage fees and related income This revenue category primarily reflects Retail Financial Services’ mortgage banking revenue, including fees and income derived from mortgages originated with the intent to sell; mortgage sales and servicing; the impact of risk management activities associated with the mortgage pipeline, warehouse and MSRs; and revenue related to any residual interests held from mortgage securitizations.
This revenue category also includes gains and losses on sales and lower of cost or fair value adjustments for mortgage loans held-for-sale, as well as changes in fair value for mortgage loans originated with the intent to sell and measured at fair value under SFAS 159.
For loans measured at fair value under SFAS 159, origination costs are recognized in the associated expense category as incurred.
Costs to originate loans held-forsale and accounted for at the lower of cost or fair value are deferred and recognized as a component of the gain or loss on sale.
Net interest income from mortgage loans and securities gains and losses on available-for-sale (“AFS”) securities used in mortgage-related risk management activities are not included in Mortgage fees and related income.
For a further discussion of MSRs, see Note 18 on pages 154–156 of this Annual Report.
Credit card income This revenue category includes interchange income from credit and debit cards and servicing fees earned in connection with securitization activities.
Volume-related payments to partners and expense for rewards programs are netted against interchange income.
Expense related to rewards programs are recorded when the rewards are earned by the customer.
Other fee revenue is recognized as earned, except for annual fees, which are deferred and recognized on a straight-line basis over the 12-month period to which they pertain.
Direct loan origination costs are also deferred and recognized over a 12-month period.
Credit card revenue sharing agreements The Firm has contractual agreements with numerous affinity organizations and co-brand partners, which grant the Firm exclusive rights to market to the members or customers of such organizations and partners.
These organizations and partners endorse the credit card programs and provide their mailing lists to the Firm, and they may also conduct marketing activities and provide awards under the various credit card programs.
The terms of these agreements generally range from three to 10 years.
The economic incentives the Firm pays to the endorsing organizations and partners typically include payments based upon new account originations, charge volumes, and the cost of the endorsing organizations’ or partners’ marketing activities and awards.
The Firm recognizes the payments made to the affinity organizations and co-brand partners based upon new account originations as direct loan origination costs.
Payments based upon charge volumes are considered by the Firm as revenue sharing with the affinity organizations and co-brand partners, which are deducted from Credit card income as the related revenue is earned.
Payments based upon marketing efforts undertaken by the endorsing organization or partner are expensed by the Firm as incurred.
These costs are recorded within Noninterest expense.
The allowance for credit losses increased $2.3 billion from December 31, 2006.
The consumer and wholesale components of the allowance increased $1.5 billion and $779 million, respectively.
The increase in the consumer portion of the allowance included increases of $1.3 billion and $215 million in RFS and CS, respectively.
The increase in the wholesale portion of the allowance was primarily due to loan growth in the IB and CB.
Excluding Loans held-for-sale and loans carried at fair value, the Allowance for loan losses represented 1.88% of loans at December 31, 2007, compared with 1.70% at December 31, 2006 To provide for the risk of loss inherent in the Firm’s process of extending credit, management also computes an asset-specific component and a formula-based component for wholesale lendingrelated commitments.
These components are computed using a methodology similar to that used for the wholesale loan portfolio, modified for expected maturities and probabilities of drawdown.
This allowance, which is reported in Other liabilities, was $850 million and $524 million at December 31, 2007 and 2006, respectively.
The increase reflected growth in lending-related commitments and updates to inputs used in the calculation.
Provision for credit losses For a discussion of the reported Provision for credit losses, see page 33 of this Annual Report.
The managed provision for credit losses includes credit card securitizations.
For the year ended December 31, 2007, the increase in the Provision for credit losses was due to an increase year-over-year in the allowance for credit losses largely related to home equity loans, higher credit card net charge-offs in the consumer businesses and an increase in the wholesale businesses.
The increase in the allowance in the wholesale businesses was due to the weakening credit environment as well as growth in the wholesale portfolio.
The prior year benefited from a lower level of credit card net charge-offs, which reflected a lower level of losses following the change in bankruptcy legislation in the fourth quarter of 2005.
## Table 1 ##
Management’s discussion and analysis 132 JPMorgan Chase & Co. /2010 Annual Report unpaid principal balance due to negative amortization of option ARMs was $24 million and $78 million at December 31, 2010 and 2009, respectively.
The Firm estimates the following balances of option ARM loans will experience a recast that results in a payment increase: $72 million in 2011, $241 million in 2012 and $784 million in 2013.
The Firm did not originate option ARMs and new originations of option ARMs were discontinued by Washington Mutual prior to the date of JPMorgan Chase’s acquisition of its banking operations.
Subprime mortgages at December 31, 2010 were $11.3 billion, compared with $12.5 billion at December 31, 2009.
The decrease was due to paydowns and charge-offs on delinquent loans, partially offset by the addition of loans as a result of the adoption of the accounting guidance related to VIEs.
Late-stage delinquencies remained elevated but continued to improve, albeit at a slower rate during the second half of the year, while early-stage delinquencies stabilized at an elevated level during this period.
Nonaccrual loans improved largely as a result of the improvement in late-stage delinquencies.
Charge-offs reflected modest improvement.
Auto: Auto loans at December 31, 2010, were $48.4 billion, compared with $46.0 billion at December 31, 2009.
Delinquent and nonaccrual loans have decreased.
In addition, net charge-offs have declined 52% from the prior year.
Provision expense decreased due to favorable loss severity as a result of a strong usedcar market nationwide and reduced loss frequency due to the tightening of underwriting criteria in earlier periods.
The auto loan portfolio reflected a high concentration of prime quality credits.
Business banking: Business banking loans at December 31, 2010, were $16.8 billion, compared with $17.0 billion at December 31, 2009.
The decrease was primarily a result of run-off of the Washington Mutual portfolio and charge-offs on delinquent loans.
These loans primarily include loans which are highly collateralized, often with personal loan guarantees.
Nonaccrual loans continued to remain elevated.
After having increased during the first half of 2010, nonaccrual loans as of December 31, 2010, declined to year-end 2009 levels.
Student and other: Student and other loans at December 31, 2010, including loans held-for-sale, were $15.3 billion, compared with $16.4 billion at December 31, 2009.
Other loans primarily include other secured and unsecured consumer loans.
Delinquencies reflected some stabilization in the second half of 2010, but remained elevated.
Charge-offs during 2010 remained relatively flat with 2009 levels reflecting the impact of elevated unemployment levels.
Purchased credit-impaired loans: PCI loans at December 31, 2010, were $72.8 billion compared with $81.2 billion at December 31, 2009.
This portfolio represents loans acquired in the Washington Mutual transaction that were recorded at fair value at the time of acquisition.
That fair value included an estimate of credit losses expected to be realized over the remaining lives of the loans, and therefore no allowance for loan losses was recorded for these loans as of the acquisition date.
The Firm regularly updates the amount of principal and interest cash flows expected to be collected for these loans.
Probable decreases in expected loan principal cash flows would trigger the recognition of impairment through the provision for loan losses.
Probable and significant increases in expected cash flows (e. g. , decreased principal credit losses, the net benefit of modifications) would first reverse any previously recorded allowance for loan losses, with any remaining increase in the expected cash flows recognized prospectively in interest income over the remaining estimated lives of the underlying loans.
During 2010, management concluded as part of the Firm’s regular assessment of the PCI pools that it was probable that higher expected principal credit losses would result in a decrease in expected cash flows.
Accordingly, the Firm recognized an aggregate $3.4 billion impairment related to the home equity, prime mortgage, option ARM and subprime mortgage PCI portfolios.
As a result of this impairment, the Firm’s allowance for loan losses for the home equity, prime mortgage, option ARM and subprime mortgage PCI portfolios was $1.6 billion, $1.8 billion, $1.5 billion and $98 million, respectively, at December 31, 2010, compared with an allowance for loan losses of $1.1 billion and $491 million for the prime mortgage and option ARM PCI portfolios, respectively, at December 31, 2009.
Approximately 39% of the option ARM borrowers were delinquent, 5% were making interest-only or negatively amortizing payments, and 56% were making amortizing payments.
Approximately 50% of current borrowers are subject to risk of payment shock due to future payment recast; substantially all of the remaining loans have been modified to a fixed rate fully amortizing loan.
The cumulative amount of unpaid interest added to the unpaid principal balance of the option ARM PCI pool was $1.4 billion and $1.9 billion at December 31, 2010 and 2009, respectively.
The Firm estimates the following balances of option ARM PCI loans will experience a recast that results in a payment increase: $1.2 billion in 2011, $2.7 billion in 2012 and $508 million in 2013.
The following table provides a summary of lifetime loss estimates included in both the nonaccretable difference and the allowance for loan losses.
Principal charge-offs will not be recorded on these pools until the nonaccretable difference has been fully depleted.
## Table 2 ##
(a) Includes the original nonaccretable difference established in purchase accounting of $30.5 billion for principal losses only.
The remaining nonaccretable difference for principal losses only was $14.1 billion and $21.1 billion at December 31, 2010 and 2009, respectively.
All probable increases in principal losses and foregone interest subsequent to the purchase date are reflected in the allowance for loan losses.
(b) Life-to-date (“LTD”) liquidation losses represent realization of loss upon loan resolution.

<table><tr><td>Year ended December 31, (in millions)</td><td> 2007</td><td>2006</td><td>2005</td></tr><tr><td>Underwriting:</td><td></td><td></td><td></td></tr><tr><td>Equity</td><td>$1,713</td><td>$1,179</td><td>$864</td></tr><tr><td>Debt</td><td>2,650</td><td>2,703</td><td>1,969</td></tr><tr><td> Total Underwriting</td><td>4,363</td><td>3,882</td><td>2,833</td></tr><tr><td>Advisory</td><td>2,272</td><td>1,638</td><td>1,255</td></tr><tr><td> Total</td><td>$6,635</td><td>$5,520</td><td>$4,088</td></tr></table>
<table><tr><td>Year ended December 31,</td><td colspan="3">Provision for loan losses</td><td colspan="3">Provision for lending-related commitments</td><td colspan="3">Total provision for credit losses</td></tr><tr><td>(in millions)</td><td>2007</td><td>2006</td><td>2005</td><td>2007</td><td>2006</td><td>2005</td><td>2007</td><td>2006</td><td>2005</td></tr><tr><td>Investment Bank</td><td>$376</td><td>$112</td><td>$-757</td><td>$278</td><td>$79</td><td>$-81</td><td>$654</td><td>$191</td><td>$-838</td></tr><tr><td>Commercial Banking</td><td>230</td><td>133</td><td>87</td><td>49</td><td>27</td><td>-14</td><td>279</td><td>160</td><td>73</td></tr><tr><td>Treasury & Securities Services</td><td>11</td><td>-1</td><td>-1</td><td>8</td><td>—</td><td>1</td><td>19</td><td>-1</td><td>—</td></tr><tr><td>Asset Management</td><td>-19</td><td>-30</td><td>-55</td><td>1</td><td>2</td><td>-1</td><td>-18</td><td>-28</td><td>-56</td></tr><tr><td>Corporate</td><td>—</td><td>-1</td><td>10</td><td>—</td><td>—</td><td>—</td><td>—</td><td>-1</td><td>10</td></tr><tr><td> Total Wholesale</td><td>598</td><td>213</td><td>-716</td><td>336</td><td>108</td><td>-95</td><td>934</td><td>321</td><td>-811</td></tr><tr><td>Retail Financial Services</td><td>2,620</td><td>552</td><td>721</td><td>-10</td><td>9</td><td>3</td><td>2,610</td><td>561</td><td>724</td></tr><tr><td>Card Services – reported</td><td>3,331</td><td>2,388</td><td>3,570</td><td>—</td><td>—</td><td>—</td><td>3,331</td><td>2,388</td><td>3,570</td></tr><tr><td>Corporate</td><td>-11</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>-11</td><td>—</td><td>—</td></tr><tr><td> Total Consumer</td><td>5,940</td><td>2,940</td><td>4,291</td><td>-10</td><td>9</td><td>3</td><td>5,930</td><td>2,949</td><td>4,294</td></tr><tr><td> Total provision for credit losses – reported</td><td>6,538</td><td>3,153</td><td>3,575</td><td>326</td><td>117</td><td>-92</td><td>6,864</td><td>3,270</td><td>3,483</td></tr><tr><td>Credit Services – securitized</td><td>2,380</td><td>2,210</td><td>3,776</td><td>—</td><td>—</td><td>—</td><td>2,380</td><td>2,210</td><td>3,776</td></tr><tr><td> Total provision for credit losses – managed</td><td>$8,918</td><td>$5,363</td><td>$7,351</td><td>$326</td><td>$117</td><td>$-92</td><td>$9,244</td><td>$5,480</td><td>$7,259</td></tr></table>
<table><tr><td></td><td>Lifetime loss estimates<sup>(a)</sup></td><td>LTD liquidation losses<sup>(b)</sup></td></tr><tr><td>December 31, (in millions)</td><td>2010</td><td>2009</td><td>2010</td><td>2009</td></tr><tr><td>Option ARMs</td><td>$11,588</td><td>$10,650</td><td>$4,860</td><td>$1,744</td></tr><tr><td>Home equity</td><td>14,698</td><td>13,138</td><td>8,810</td><td>6,060</td></tr><tr><td>Prime mortgage</td><td>4,870</td><td>4,240</td><td>1,495</td><td>794</td></tr><tr><td>Subprime mortgage</td><td>3,732</td><td>3,842</td><td>1,250</td><td>796</td></tr><tr><td>Total</td><td>$34,888</td><td>$31,870</td><td>$16,415</td><td>$9,394</td></tr></table>

Question: in the consumer loan business , what percent of the adjustable rate borrowers weren't making any principal payments?
Answer: 61