Citigroup has sold $10 billion of residential mortgages over the past five quarters as it continues to shrink its “bad bank,” which is known as Citi Holdings.
These sales, revealed in is first quarter earnings release and conference call, include $6 billion of delinquent loans, said Citigroup chief financial officer John Gerspach.
"We continue to think the best way to manage the severity risk in that business is by selling delinquent mortgages," he told investors and analysts.
Citi Holdings held $76 billion of first mortgages at the end of the first quarter, down 21% from a year ago. Delinquent loans (90-days or more past due) totaled $4.5 billion, down more than 50% from last year. The huge decline in delinquencies is due to NPL sales and loan modifications.
"Over the past eight quarters, we have converted $5.3 billion of trial mods to permanent modifications," Gerspach said. He noted that 75% of the modifications came through the government's Home Affordable Modification Program (HAMP). "We continue to experience re-default rates on HAMP modified loans of less than 15%," the CFO said.
The remainder was modified under other Citi programs and the re-default rate on these proprietary modifications is less than 25%.
Citi Holdings sold $1.1 billion of delinquent mortgages in the first quarter, down slightly from $1.4 billion in the fourth quarter. "We are still active sellers of mortgages," Gerspach said.