Citibank 2010 Annual Report Download - page 110

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Short-Term Programs. Citigroup has also instituted short-term
programs (primarily in the U.S.) to assist borrowers experiencing temporary
hardships. These programs include short-term (12 months or less) interest
rate reductions and deferrals of past due payments. The loan volume
under these short-term programs has increased significantly over the past
18 months, and loan loss reserves for these loans have been enhanced,
giving consideration to the higher risk associated with those borrowers and
reflecting the estimated future credit losses for those loans. See Note 1 to the
Consolidated Financial Statements for a discussion of the allowance for loan
losses for such modified loans.
The following table presents the amounts of gross loans modified under
short-term interest rate reduction programs in the U.S. as of December 31, 2010:
December 31, 2010
In millions of dollars Accrual Non-accrual
Cards $2,757 $ —
Mortgage and real estate 1,634 70
Installment and other 1,086 110
Significant short-term U.S. programs include:
North America Cards
Universal Payment Program (UPP). The North America cards
business provides short-term interest rate reductions to assist borrowers
experiencing temporary hardships through the UPP. Under this program, a
participant’s APR is reduced by at least 500 basis points for a period of up to
12 months. The minimum payment is established based upon the customer’s
specific circumstances and is designed to amortize at least 1% of the principal
balance each month. The participant’s APR returns to its original rate at the
end of the program or earlier if they fail to make the required payments.
U.S. Mortgages
Temporary AOT. This program is targeted to Consumer Finance
customers with a temporary hardship. Examples of temporary hardships
include a short-term medical disability or a temporary reduction of pay.
Under this program, which can include both an interest rate reduction and a
term extension, the interest rate is reduced for either a five- or an eleven-
month period. At the end of the temporary modification period, the interest
rate reverts to the pre-modification rate. To qualify, customers must make a
payment at the reduced payment amount prior to the AOT being processed.
In addition, customers must provide income verification, while employment
is verified and monthly obligations are validated through an updated credit
report. If the customer is still undergoing hardship at the conclusion of the
temporary payment reduction, an extension of the temporary terms can be
considered in either of the time period increments above, to a maximum of
24 months. Effective December 2010, the timing of the qualifying payment
is earlier and updated documentation is required at each extension. These
changes are expected to reduce overall entry volumes. In cases where
the account is over 60 days past due at the expiration of the temporary
modification period, the terms of the modification are made permanent and
the payment is kept at the reduced amount for the remaining life of the loan.
U.S Installment Loans
Temporary AOT. This program is targeted to Consumer Finance
customers with a temporary hardship. Examples of temporary hardships
include a short-term medical disability or a temporary reduction of pay.
Under this program, which can include both an interest rate reduction and a
term extension, the interest rate is reduced for either a five- or an eleven-
month period. At the end of the temporary modification period, the interest
rate reverts to the pre-modification rate. To qualify, customers must make a
payment at the reduced payment amount prior to the AOT being processed.
In addition, customers must provide income verification, while employment
is verified and monthly obligations are validated through an updated credit
report. If the customer is still undergoing hardship at the conclusion of the
temporary payment reduction, an extension of the temporary terms can
be considered in either of the time period increments referenced above,
to a maximum of 24 months. Effective December 2010, the timing of the
qualifying payment is earlier and updated documentation is required at
each extension. These changes are expected to reduce overall entry volumes.
In cases where the account is over 90 days past due at the expiration of the
temporary modification period, the terms of the modification are made
permanent and the payment is kept at the reduced amount for the remaining
life of the loan.
Short-Term Modification Programs—Summary
The following table sets forth, as of December 31, 2010, information related
to Citi’s significant short-term U.S. cards, mortgage, and installment loan
modification programs:
In millions of dollars
Program
balance
Program
start date (1)
Average
interest rate
reduction
Average time
period for
reduction
UPP $2,757 22% 12 months
Mortgage
Temporary AOT 1,701 1Q09 3 8 months
Installment
Temporary AOT 1,196 1Q09 4 7 months
(1) Provided if program was introduced after 2008.