Citi Marks Up MSR Value as Portfolio Declines in Size

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 SEC filing accompanying its fourth quarter results. At press time a company spokesman had not returned a telephone call about the change in asset value on the MSRs. 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.