Citibank 2012 Annual Report Download - page 171

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Consumer loans
Consumer loans represent loans and leases managed primarily by the Global
Consumer Banking and Local Consumer Lending businesses.
Non-accrual and re-aging policies
As a general rule, interest accrual ceases for installment and real estate (both
open- and closed-end) loans when payments are 90 days contractually past
due. For credit cards and unsecured revolving loans, however, Citi generally
accrues interest until payments are 180 days past due. As a result of OCC
guidance issued in the first quarter of 2012, home equity loans in regulated
bank entities are classified as non-accrual if the related residential first
mortgage is 90 days or more past due. As a result of OCC guidance issued
in the third quarter of 2012, mortgage loans in regulated bank entities
discharged through Chapter 7 bankruptcy, other than FHA-insured loans,
are classified as non-accrual. Commercial market loans are placed on a cash
(non-accrual) basis when it is determined, based on actual experience and
a forward-looking assessment of the collectability of the loan in full, that the
payment of interest or principal is doubtful or when interest or principal is 90
days past due.
Loans that have been modified to grant a short-term or long-term
concession to a borrower who is in financial difficulty may not be accruing
interest at the time of the modification. The policy for returning such
modified loans to accrual status varies by product and/or region. In most
cases, a minimum number of payments (ranging from one to six) are
required, while in other cases the loan is never returned to accrual status. For
regulated bank entities, such modified loans are returned to accrual status if
a credit evaluation at the time of or subsequent to the modification indicates
the borrower’s ability to meet the restructured terms, and the borrower is
current and has demonstrated a reasonable period of sustained payment
performance (minimum six months of consecutive payments).
For U.S. Consumer loans, generally one of the conditions to qualify for
modification is that a minimum number of payments (typically ranging
from one to three) must be made. Upon modification, the loan is re-aged to
current status. However, re-aging practices for certain open-ended Consumer
loans, such as credit cards, are governed by Federal Financial Institutions
Examination Council (FFIEC) guidelines. For open-ended Consumer loans
subject to FFIEC guidelines, one of the conditions for the loan to be re-aged
to current status is that at least three consecutive minimum monthly
payments, or the equivalent amount, must be received. In addition, under
FFIEC guidelines, the number of times that such a loan can be re-aged is
subject to limitations (generally once in 12 months and twice in five years).
Furthermore, Federal Housing Administration (FHA) and Department of
Veterans Affairs (VA) loans are modified under those respective agencies’
guidelines and payments are not always required in order to re-age a
modified loan to current.
Charge-off policies
Citi’s charge-off policies follow the general guidelines below:
•฀ Unsecured installment loans are charged off at 120 days past due.
•฀ Unsecured revolving loans and credit card loans are charged off at 180
days contractually past due.
•฀ Loans secured with non-real estate collateral are written down to the
estimated value of the collateral, less costs to sell, at 120 days past due.
•฀ Real estate-secured loans are written down to the estimated value of the
property, less costs to sell, at 180 days contractually past due.
•฀ Non-bank loans secured by real estate are written down to the estimated
value of the property, less costs to sell, at the earlier of the receipt of title or
12 months in foreclosure (a process that must commence when payments
are 120 days contractually past due).
•฀ Non-bank unsecured personal loans are charged off when the loan is
180 days contractually past due if there have been no payments within
the last six months, but in no event can these loans exceed 360 days
contractually past due.
•฀ Unsecured loans in bankruptcy are charged off within 60 days of
notification of filing by the bankruptcy court or in accordance with Citi’s
charge-off policy, whichever occurs earlier.
•฀ As a result of OCC guidance issued in the third quarter of 2012, real estate-
secured loans that were discharged through Chapter 7 bankruptcy, other
than FHA-insured loans, are written down to the collateral value of the
property, less costs to sell. Other real estate-secured loans in bankruptcy
are written down to the estimated value of the property, less costs to sell, at
the later of 60 days after notification or 60 days contractually past due.
•฀ Non-bank unsecured personal loans in bankruptcy are charged off when
they are 30 days contractually past due.
•฀ Commercial market loans are written down to the extent that principal is
judged to be uncollectable.
Corporate loans
Corporate loans represent loans and leases managed by ICG or the Special
Asset Pool. Corporate loans are identified as impaired and placed on a cash
(non-accrual) basis when it is determined, based on actual experience and
a forward-looking assessment of the collectability of the loan in full, that
the payment of interest or principal is doubtful or when interest or principal
is 90 days past due, except when the loan is well collateralized and in the
process of collection. Any interest accrued on impaired Corporate loans
and leases is reversed at 90 days and charged against current earnings,
and interest is thereafter included in earnings only to the extent actually
received in cash. When there is doubt regarding the ultimate collectability
of principal, all cash receipts are thereafter applied to reduce the recorded
investment in the loan.