Citibank 2015 Annual Report Download - page 89

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Revolving HELOCs
As noted above, as of December 31, 2015, Citi had $16.5 billion of Revolving
HELOCs, of which $4.2 billion had commenced amortization (compared
to $1.9 billion at December 31, 2014) and $12.3 billion were still within
their revolving period and have not commenced amortization, or “reset,”
(compared to $16.7 billion at December 31, 2014). The following chart
indicates the FICO and combined loan-to-value (CLTV) characteristics of
Citi’s Revolving HELOCs portfolio and the year in which they reset:
FICO 660+,CLTV>100 FICO<660,CLTV>100 FICO 660+,CLTV>=80<=100 FICO<660,CLTV>=80<=100
FICO 660+,CLTV<80 FICO<660,CLTV<80 %ENR
$6.0
$5.0
$4.0
$3.0
$2.0
$1.0
$0.0
2019+201820172016201520142013<2013
2.1% 2.0%
4.6%
16.4%
24.4% 24.7%
13.1% 12.6%
North America Home Equity Lines of Credit Amortization—Citigroup
Total ENR by Reset Year
In billions of dollars as of December 31, 2015
$7.0
Note: Totals may not sum due to rounding.
Approximately 25% of Citi’s total Revolving HELOCs portfolio had
commenced amortization as of December 31, 2015 (compared to 10% as
of December 31, 2014). Of the remaining Revolving HELOCs portfolio,
approximately 66% will commence amortization during the period of
2016–2017. Before commencing amortization, Revolving HELOC borrowers
are required to pay only interest on their loans. Upon amortization, these
borrowers will be required to pay both interest, usually at a variable rate,
and principal that amortizes typically over 20 years, rather than the typical
30-year amortization. As a result, Citi’s customers with Revolving HELOCs
that reset could experience “payment shock” due to the higher required
payments on the loans.
While it is not certain what ultimate impact this payment shock could
have on Citi’s delinquency rates and net credit losses, Citi currently estimates
that the monthly loan payment for its Revolving HELOCs that reset during
the period of 2016–2017 could increase on average by approximately $370,
or 165%. Increases in interest rates could further increase these payments
given the variable nature of the interest rates on these loans post-reset. Of
the Revolving HELOCs that will commence amortization during the period
of 2016–2017, approximately $0.6 billion, or 8%, of the loans have a CLTV
greater than 100% as of December 31, 2015. Borrowers’ high loan-to-value
positions, as well as the cost and availability of refinancing options, could
limit borrowers’ ability to refinance their Revolving HELOCs as these loans
begin to reset.