Citibank 2010 Annual Report Download - page 243

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Key assumptions used in measuring the fair value of retained interests at the date of sale or securitization of mortgage receivables for the years ended
December 31, 2010 and 2009 are as follows:
December 31, 2010 December 31, 2009
U.S. agency-
sponsored mortgages
Non-agency-
sponsored mortgages
Agency- and non-agency-
sponsored mortgages
Discount rate 0.1% to 37.4% 0.8% to 44.9% 0.4% to 52.2%
Constant prepayment rate 2.7% to 28.0% 1.5% to 49.5% 0.5% to 60.3%
Anticipated net credit losses NM 13.0% to 80.0% 6.0% to 85.0%
NM Not meaningful. Anticipated net credit losses are not meaningful due to U.S. agency guarantees.
The range in the key assumptions is due to the different characteristics
of the interests retained by the Company. The interests retained range
from highly rated and/or senior in the capital structure to unrated and/or
residual interests.
The effect of adverse changes of 10% and 20% in each of the key
assumptions used to determine the fair value of retained interests is disclosed
below. The negative effect of each change is calculated independently,
holding all other assumptions constant. Because the key assumptions may
not in fact be independent, the net effect of simultaneous adverse changes
in the key assumptions may be less than the sum of the individual effects
shown below.
At December 31, 2010, the key assumptions used to value retained
interests and the sensitivity of the fair value to adverse changes of 10% and
20% in each of the key assumptions were as follows:
December 31, 2010
U.S. agency-
sponsored
mortgages
Non-agency-
sponsored
mortgages
Discount rate 0.1% to 37.4 % 0.8% to 44.9%
Constant prepayment rate 2.7% to 28.0% 1.0% to 57.3%
Anticipated net credit losses NM 10.8% to 90.0%
NM Not meaningful. Anticipated net credit losses are not meaningful due to U.S. agency guarantees.
In millions of dollars
U.S. agency-
sponsored
mortgages
Non-agency-
sponsored
mortgages
Carrying value of retained interests $2,611 $1,118
Discount rates
Adverse change of 10% $ (101) $ (35)
Adverse change of 20% (195) (66)
Constant prepayment rate
Adverse change of 10% $ (97) $ (21)
Adverse change of 20% (188) (41)
Anticipated net credit losses
Adverse change of 10% $ (8) $ 2
Adverse change of 20% (15) (8)