Citigroup marked up the asset value of its residential mortgage servicing rights by 15% in the fourth quarter to $6.5 billion, even though the dollar volume of its portfolio of housing receivables is declining.

The mark-up in MSR value is mentioned in a new Securities and Exchange Commission (SEC) filing accompanying its fourth quarter results, which were released Tuesday morning.

The bank's CitiMortgage affiliate services roughly $740 billion in home mortgages compared to $809 billion at year-end 2008. (At Dec. 31, 2008 it valued its residential MSRs at $5.66 billion.)

The mega-bank — which is experiencing major declines in residential production — reported total company-wide credit losses of $7.1 billion in the fourth quarter.

It took a $2.1 billion net credit loss on its $177.2 billion North American residential loan portfolio, a 7% drop from the previous quarter.

Citi said the decline reflected lower losses on second mortgages and an increase of distressed borrowers that have been placed in payment trials for a possible loan modification.

"Increasing volumes of trial modifications under the Home Affordable Modification Program contributed to the sequential decline in losses; the loan loss reserve was increased to offset this impact," Citi said in a summary of its quarterly earnings.

Overall, 8.3% of its U.S. residential portfolio is 90 days or more past due, an increase of 114 basis points from the third quarter.

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