Citibank 2011 Annual Report Download - page 97

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North America Consumer Mortgage Lending
Overview
Citi’s North America Consumer mortgage portfolio consists of both
residential first mortgages and home equity loans. As of December 31, 2011,
Citi’s North America Consumer residential first mortgage portfolio totaled
$95.4 billion, while the home equity loan portfolio was $43.5 billion. Of the
first mortgages, $67.5 billion are recorded in LCL within Citi Holdings, with
the remaining $27.9 billion recorded in Citicorp. With respect to the home
equity loan portfolio, $40.0 billion are recorded in LCL, and $3.5 billion are
reported in Citicorp.
Citi’s residential first mortgage portfolio included $9.2 billion of loans
with FHA insurance or VA guarantees as of December 31, 2011. This portfolio
consists of loans originated to low-to-moderate-income borrowers with lower
FICO (Fair Isaac Corporation) scores and generally has higher loan-to-
value ratios (LTVs). Losses on FHA loans are borne by the sponsoring agency,
provided that the insurance terms have not been rescinded as a result of an
origination defect. With respect to VA loans, the VA establishes a loan-level
loss cap, beyond which Citi is liable for loss. While FHA and VA loans have
high delinquency rates, given the insurance and guarantees, respectively, Citi
has experienced negligible credit losses on these loans to date.
Also as of December 31, 2011, the residential first mortgage portfolio
included $1.6 billion of loans with LTVs above 80%, which have insurance
through mortgage insurance companies, and $1.2 billion of loans subject to
long-term standby commitments (LTSC) with U.S. government-sponsored
entities (GSEs), for which Citi has limited exposure to credit losses. Citi’s
home equity loan portfolio also included $0.4 billion of loans subject to
LTSCs with GSEs, for which Citi also has limited exposure to credit losses.
These guarantees and commitments may be rescinded in the event of
origination defects.
Citi’s allowance for loan loss calculations takes into consideration the
impact of the guarantees and commitments referenced above.
Citi does not offer option adjustable rate mortgages/negative amortizing
mortgage products to its customers. As a result, option adjustable rate
mortgages/negative amortizing mortgages represent an insignificant portion
of total balances, since they were acquired only incidentally as part of prior
portfolio and business purchases.
As of December 31, 2011, Citi’s North America residential first mortgage
portfolio contained approximately $15 billion of adjustable rate mortgages
that are required to make a payment only of accrued interest for the payment
period, or an interest-only payment. Borrowers that are currently required
to make an interest-only payment cannot select a lower payment that would
negatively amortize the loan. Residential first mortgages with this payment
feature are primarily to high-credit-quality borrowers that have on average
significantly higher origination and refreshed FICO scores than other loans
in the residential first mortgage portfolio.
North America Consumer Mortgage Quarterly Credit Trends—
Delinquencies and Net Credit Losses—Residential First Mortgages
The following charts detail the quarterly trends in delinquencies and
net credit losses for Citi’s residential first mortgage portfolio in North
America. As referenced in the “Overview” section above, the majority of
Citi’s residential first mortgage exposure arises from its portfolio within Citi
Holdings – LCL.
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11
Residential First Mortgages — Citigroup
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