Citibank 2015 Annual Report Download - page 158

140
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 may only be modified under those respective
agencies’ guidelines and payments are not always required in order to re-age
a modified loan to current.
Consumer Charge-Off Policies
Citi’s charge-off policies follow the general guidelines below:
• Unsecured installment loans are charged off at 120 days contractually
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
contractually 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.
• Real estate-secured loans are charged off no later than 180 days
contractually past due if a decision has been made not to foreclose on the
loans.
• Non-bank real estate-secured loans are charged off at the earlier of
180 days contractually past due, if there have been no payments within
the last six months, or 360 days contractually past due, if a decision has
been made not to foreclose on the loans.
• 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, the initiation of foreclosure (a process that must commence when
payments are 120 days contractually past due), when the loan is 180 days
contractually past due if there have been no payments within the past six
months or 360 days contractually past due.
• Non-bank unsecured personal loans are charged off at the earlier of
180 days contractually past due if there have been no payments within the
last six months, or 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.
• Consistent with OCC guidance, real estate-secured loans that were
discharged through Chapter 7 bankruptcy, other than FHA-insured loans,
are written down to the estimated 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 loans secured by real estate that are discharged through
Chapter 7 bankruptcy are written down to the estimated value of the
property, less costs to sell, at 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 Institutional Clients
Group (ICG). 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.
Impaired corporate loans and leases are written down to the extent that
principal is deemed to be uncollectable. Impaired collateral-dependent loans
and leases, where repayment is expected to be provided solely by the sale
of the underlying collateral and there are no other available and reliable
sources of repayment, are written down to the lower of cost or collateral
value. Cash-basis loans are returned to accrual status when all contractual
principal and interest amounts are reasonably assured of repayment and
there is a sustained period of repayment performance in accordance with the
contractual terms.
Loans Held-for-Sale
Corporate and consumer loans that have been identified for sale are classified
as loans held-for-sale and included in Other assets. The practice of Citi’s U.S.
prime mortgage business has been to sell substantially all of its conforming
loans. As such, U.S. prime mortgage conforming loans are classified as
held-for-sale and the fair value option is elected at origination, with changes
in fair value recorded in Other revenue. With the exception of those loans
for which the fair value option has been elected, held-for-sale loans are
accounted for at the lower of cost or market value, with any write-downs or
subsequent recoveries charged to Other revenue. The related cash flows are
classified in the Consolidated Statement of Cash Flows in the cash flows from
operating activities category on the line Change in loans held-for-sale.