Despite Woes, Citigroup Reports Success in Foreclosure Prevention Efforts

MBA (3/5/2008 ) Palaparty, Vijay
Citigroup Inc., New York, said its loss mitigation successes outnumber foreclosures by almost 5 to 1, according to a report outlining the effects of its foreclosure prevention efforts over the past year.

Citigroup's report comes amid investor skittishness over the company's overall financial performance and forecasts of further losses at the financial giant. Citicorp's share price fell to its lowest level in nine years after a Mideast sovereign wealth fund investor said the company would have to raise more capital to stay in business.
The company report, Citi U.S. Mortgage Lending Data and Foreclosure Prevention Efforts, found that only 1 percent of all loans it serviced were in loss mitigation or foreclosure status at the end of 2007. "In the current difficult housing market, [we] has moved aggressively to help distressed borrowers maintain homeownership,” a Citi spokesperson said. “We have been working in partnership with a variety of stakeholders including industry participants, federal and state officials, regulators, numerous nonprofit organizations and others to develop solutions that will keep people in their homes.”

The report also revealed that most of Citi’s serviced portfolio consists of primary loans. Data was presented in three FICO bands—scores below 620, scores between 620 and 659 and scores 660 and higher—versus using the terms "prime" and "subprime." The company reported that only 21 percent of its serviced portfolio contains loans under the 660 band, of which only 10 percent were below 620.

The portion of adjustable-rate mortgages below 620 was at 4.2 percent and declined to .07 percent of overall mortgage volume for the fourth quarter last year. Citi’s total serviced portfolio totaled $846.9 billion by the end of last year.

Citi also reported that its total exposure to ARM initial resets for scores below 620 this year is low at 1.7 percent, relative to the total market. A significant portion, 1.4 percent, was recently acquired in the Citi Residential Servicing Platform.

“Year-end delinquency levels in our held portfolio are similar to 2003 levels,” the report said. “We are experiencing greater delinquencies from loans that have FICO scores below 620. Delinquencies in this segment are 7.83 percent, about three times higher than those in the overall held first mortgage portfolio.”

To reach out to the borrowers with resetting ARM loans, the company established a monthly communication plan that begins notifying six to 12 months prior to the reset. The message types include direct mail, statement messaging, telephone contacts and email. Borrowers are informed of their options, based on eligibility, including product choices, the refinance process, loan modification and rate discounts.

Citi outlined its foreclosure prevention efforts to assist borrowers who face trouble meeting their mortgage payments. The company reports that it reaches out to borrowers who miss payments to inform them of the availability of its free credit counseling. Additionally, it makes its loss mitigation staff available to borrowers or nonprofit organizations acting on behalf of borrowers. Additionally, it provides workout arrangements and other options so that wherever possible, borrowers can retain their homes.

“On balance, Citi mortgage originations did not follow the market in aggressively introducing the non-traditional products and more aggressive underwriting practices,” the report said. “Citi has not originated negative amortization loans, ARMs, low FICO interest-only loans or low FICO/high loan-to-value stated income loans in our CitiMortgage, Citi Home Equity and CFNA portfolios. Citi has offered very limited hybrid ARMs employing conservative underwriting criteria when originating these loans.”

In terms of loss mitigation actions, extensions and modifications were most prevalent throughout 2007.

However, Zawya Dow Jones reported yesterday that Mideast sovereign wealth funds, which have pumped $7.6 billion into Citi, have not stanched a drop in the bank’s stock price. The company’s price per share has fallen by one-third since November and closed yesterday at $22.10, its lowest level in nine years. Citi last year announced it planned to raise $14.5 billion in capital by selling part of its structure to sovereign wealth funds, such as Dubai International Capital.

Citi received the cash infusion from sovereign funds last year following reports that the company wrote down $11 billion in mortgage-related debt, which led to a management shakeup that included the ouster of former CEO Charles “Chuck” Prince. In January Citi reported a $9.83 billion loss for the fourth quarter, in part because of the write-downs; Merril Lynch analysts yesterday said despite the Citi report, the company could write down as much as $18 billion in mortgage-related debt in the first quarter.