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C » Topics » Delinquencies: 90+DPD-Second Mortgages

These excerpts taken from the C 10-K filed Feb 27, 2009.

Delinquencies: 90+DPD—Second Mortgages

LOGO

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Note: 90+DPD are based on balances referenced in the tables above. Second mortgages with FICOs below 620 at origination are less than 1% of the total, and the Company provides 90+DPD delinquency rates as a measure of their performance.

In light of increased delinquencies in the U.S. Consumer mortgage portfolios, during 2008 the Company expanded its allowance for loan losses related to these portfolios by approximately $4.5 billion. As of the end of 2008, the coincident reserve coverage ratio for the first and second mortgage portfolios was at 15.7 months and 13.8 months, respectively.

The following charts detail the quarterly trends in delinquencies for the Company’s first and second U.S. Consumer mortgage portfolios.

As set forth in the chart, delinquencies have increased substantially:

 

•  

The first mortgage delinquency trend shows that year-end delinquency levels have more than doubled 2003 levels. A further breakout of the FICO below 620 segment indicates that delinquencies in this segment are two times higher than in the overall first mortgage portfolio.

•  

Delinquency rates in the second mortgage portfolio are at historically high levels, particularly in the 90% or higher LTV segment. This segment has a year-end delinquency rate almost twice as high as the rate for the overall second mortgage portfolio.

Net credit losses have also increased significantly. First mortgages’ net credit losses as a percentage of average loans increased by close to 4.5 times since the end of 2007, while that of second mortgages tripled.


 

61

Table of Contents

 

First mortgage net credit losses as a percentage of average loans are nearly half the level of those in the second mortgage portfolio, despite much higher delinquencies in the first mortgage portfolio. Two major factors explain this relationship:

 

•  

First mortgages include government-guaranteed loans.

•  

Second mortgages are much more likely to go directly from delinquency to charge-off without going into foreclosure.

 

During 2008, the Company increased its efforts to contain the rise in delinquencies and mitigate losses. The Company continues to tighten credit requirements through higher FICOs, lower LTVs, increased documentation and verifications. This shift has resulted in loans originated in 2008 having higher FICO scores and lower LTVs, on average, than those originated in 2007.


 

LOGO

Note: comprised of the Citibank first mortgage portfolios and the CitiFinancial Real Estate portfolio. It includes deferred fees/costs and loans held for sale. 90+DPD based on end of period balances of $137.5 billion.

LOGO

Note: comprised of the Citibank Home Equity portfolios; 90+DPD rate calculated by combined MBA/OTS methodology. 90+DPD based on end of period balances of $59.6 billion.

 

62

Table of Contents

 

Second, the Company continues to evaluate each of its portfolios to identify those customers who might be eligible to refinance or modify their mortgages and stay in their homes, offering them different solutions. The Citi Homeowner Assistance program is an example of such efforts, preemptively reaching out to homeowners not currently behind on their mortgage payments, but that may require help to remain current on their mortgages. These efforts focus particularly on borrowers in geographies facing extreme economic distress.

Third, the Company has initiated various mortgage foreclosure moratoriums. See “Citigroup Mortgage Foreclosure Moratoriums” on page 59.

The following tables detail the Company’s first and second U.S. Consumer mortgage portfolio by origination channels, geographic distribution and origination vintage.

By Origination Channel

The Company’s U.S. Consumer mortgage portfolio was originated from three main channels: retail, broker and correspondent.

 

•  

Retail: loans originated through a direct relationship with the borrower.

•  

Broker: loans originated through a mortgage broker, where the Company underwrites the loan directly with the borrower.

•  

Correspondent: loans originated and funded by a third party, where the Company purchases the closed loans after the correspondent has funded the loan. Includes loans acquired in large bulk purchases from other mortgage originators. These types of purchases, used primarily in 2006 and 2007, mainly focused on non-prime and second-lien loans to be held on Citigroup’s balance sheet. This method of acquisition was discontinued in 2007, and the current correspondent channel focuses on acquisition of loans eligible for sale to the GSEs.

 

Delinquencies: 90+DPD—Second Mortgages

LOGO

LOGO

Note: 90+DPD are based on balances referenced in the tables above. Second mortgages with FICOs below 620 at origination are less than 1% of the total, and the Company provides 90+DPD delinquency rates as a measure of their performance.

In light of increased delinquencies in the U.S. Consumer mortgage portfolios, during 2008 the Company expanded its allowance for loan losses related to these portfolios by approximately $4.5 billion. As of the end of 2008, the coincident reserve coverage ratio for the first and second mortgage portfolios was at 15.7 months and 13.8 months, respectively.

The following charts detail the quarterly trends in delinquencies for the Company’s first and second U.S. Consumer mortgage portfolios.

As set forth in the chart, delinquencies have increased substantially:

 

•  

The first mortgage delinquency trend shows that year-end delinquency levels have more than doubled 2003 levels. A further breakout of the FICO below 620 segment indicates that delinquencies in this segment are two times higher than in the overall first mortgage portfolio.

•  

Delinquency rates in the second mortgage portfolio are at historically high levels, particularly in the 90% or higher LTV segment. This segment has a year-end delinquency rate almost twice as high as the rate for the overall second mortgage portfolio.

Net credit losses have also increased significantly. First mortgages’ net credit losses as a percentage of average loans increased by close to 4.5 times since the end of 2007, while that of second mortgages tripled.


 

61

Table of Contents

 

First mortgage net credit losses as a percentage of average loans are nearly half the level of those in the second mortgage portfolio, despite much higher delinquencies in the first mortgage portfolio. Two major factors explain this relationship:

 

•  

First mortgages include government-guaranteed loans.

•  

Second mortgages are much more likely to go directly from delinquency to charge-off without going into foreclosure.

 

During 2008, the Company increased its efforts to contain the rise in delinquencies and mitigate losses. The Company continues to tighten credit requirements through higher FICOs, lower LTVs, increased documentation and verifications. This shift has resulted in loans originated in 2008 having higher FICO scores and lower LTVs, on average, than those originated in 2007.


 

LOGO

Note: comprised of the Citibank first mortgage portfolios and the CitiFinancial Real Estate portfolio. It includes deferred fees/costs and loans held for sale. 90+DPD based on end of period balances of $137.5 billion.

LOGO

Note: comprised of the Citibank Home Equity portfolios; 90+DPD rate calculated by combined MBA/OTS methodology. 90+DPD based on end of period balances of $59.6 billion.

 

62

Table of Contents

 

Second, the Company continues to evaluate each of its portfolios to identify those customers who might be eligible to refinance or modify their mortgages and stay in their homes, offering them different solutions. The Citi Homeowner Assistance program is an example of such efforts, preemptively reaching out to homeowners not currently behind on their mortgage payments, but that may require help to remain current on their mortgages. These efforts focus particularly on borrowers in geographies facing extreme economic distress.

Third, the Company has initiated various mortgage foreclosure moratoriums. See “Citigroup Mortgage Foreclosure Moratoriums” on page 59.

The following tables detail the Company’s first and second U.S. Consumer mortgage portfolio by origination channels, geographic distribution and origination vintage.

By Origination Channel

The Company’s U.S. Consumer mortgage portfolio was originated from three main channels: retail, broker and correspondent.

 

•  

Retail: loans originated through a direct relationship with the borrower.

•  

Broker: loans originated through a mortgage broker, where the Company underwrites the loan directly with the borrower.

•  

Correspondent: loans originated and funded by a third party, where the Company purchases the closed loans after the correspondent has funded the loan. Includes loans acquired in large bulk purchases from other mortgage originators. These types of purchases, used primarily in 2006 and 2007, mainly focused on non-prime and second-lien loans to be held on Citigroup’s balance sheet. This method of acquisition was discontinued in 2007, and the current correspondent channel focuses on acquisition of loans eligible for sale to the GSEs.

 

EXCERPTS ON THIS PAGE:

10-K (2 sections)
Feb 27, 2009

RELATED TOPICS for C:

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