NEW YORK (
) -- Among the wealth of information
offered up in its annual Form 10-K late last week was an acknowledgment its reserves to repurchase loans increased more than six-fold in 2009 compared to the year before.
says in the 10-K, which was filed with the
Securities and Exchange Commission
after Friday's closing bell, that it has received a number of requests for loan documentation packages, which are "an early indicator" of potential repurchase claim activity on mortgages.
The company's loan repurchases have primarily come from the government-sponsored enterprises, such as
The loan documentation package requests, increased level of outstanding claims and increased loss severity estimates because of macroeconomic factors last year "contributed to a $493 million change in
Citigroup's estimate for the
repurchase reserve in 2009," the company said.
Citigroup's loan repurchase reserve balance at the end of the fourth quarter stood at $482 million vs. $75 million at the beginning of the year, according to the filing.
The majority of the repurchase activity last year was from loan originations at the height of the bubble in 2006 and 2007, "which also represent the vintages with the largest loss-given-repurchase," Citigroup says.
Citigroup experienced improved repurchase and loss-given-repurchase statistics from earlier loan vintages as well as the 2008 and 2009 mortgages.
The company also said in
that it expects U.S. consumer net credit losses to "increase modestly" in the first quarter on a sequential basis, and it's in the process of
from Citi Holdings, the bad bank structure, over to Citicorp, the good bank, this quarter. More than half of those assets are U.S. mortgages, the company has said.
Citigroup isn't alone in ramping up loan repurchase activity.
noted during its investor day last Thursday that repurchase demands and associated loan losses have "grown significantly" over the last 12-to-18 months and remain at elevated levels, according to presentation materials. Last year, JPMorgan had $1.6 billion of repurchase expenses/reserve build. At Dec. 31, it had $1.5 billion of reserves in its retail financial services business for repurchase demands.
JPMorgan attributed the increased loan repurchase demand stemmed from "misrepresentations" in the loan documentation, whether from the borrower in the form of incorrect income or employment information, or some sort of additional credit or undisclosed debt, the presentation slides said. Misrepresentations could have also occurred during the appraisal process. The company noted misrepresentations typically surface and are usually resolved with the GSEs within a 24-36 month process.
Citigroup shares were off a penny to $3.39 in recent action on comparatively light volume of 103.9 million. Based on Friday's close, the stock was up 2.7% in 2010.
--Written by Laurie Kulikowski in New York.