Citigroup Inc.

Citi’s first mortgage portfolio includes $9.3 billion of loans with FHA or VAguarantees. These portfolios consist of loans originated to low-to-moderateincomeborrowers with lower FICO (Fair Isaac Corporation) scores andgenerally have higher loan-to-value ratios (LTVs). Losses on FHA loans areborne by the sponsoring agency, provided that the insurance has not beenbreached as a result of an origination defect. The VA establishes a loan-levelloss cap, beyond which Citi is liable for loss. FHA and VA loans have highdelinquency rates but, given the guarantees, Citi has experienced negligiblecredit losses on these loans. The first mortgage portfolio also includes$1.8 billion of loans with LTVs above 80%, which have insurance throughprivate mortgage insurance (PMI) companies, and $1.7 billion of loanssubject to long-term standby commitments (LTSC), with U.S. governmentsponsored entities (GSEs), for which Citi has limited exposure to credit losses.Citi’s second mortgage portfolio also includes $0.6 billion of loans subject toLTSCs with GSEs, for which Citi has limited exposure to credit losses. Citi’sallowance for loan loss calculations take into consideration the impact ofthese guarantees.Consumer Mortgage Quarterly Trends—Delinquencies andNet Credit LossesThe following charts detail the quarterly trends in delinquencies andnet credit losses for Citi’s first and second Consumer mortgage portfoliosin North America. As set forth in the charts below, net credit losses anddelinquencies of 90 days or more in both first and second mortgagescontinued to improve during the fourth quarter of 2010. Citi continued tomanage down its first and second mortgage portfolios in Citi Holdings during2010. The first mortgage portfolio in Citi Holdings was reduced by almost20% to $80 billion, and the second mortgage portfolio by 14% to $44 billion,each as of December 31, 2010. These reductions were achieved through acombination of sales (first mortgages only), run-off and net credit losses.For first mortgages, delinquencies of 90 days or more were down for thefourth consecutive quarter. The sequential decline in delinquencies was dueentirely to asset sales and trial modifications converting into permanentmodifications, without which the delinquencies in first mortgages wouldhave been up slightly. During the full year 2010, Citi sold $4.8 billion indelinquent mortgages. In addition, as of December 31, 2010, Citi hadconverted a total of approximately $4.8 billion of trial modifications underCiti’s loan modification programs to permanent modifications, more thanthree-quarters of which were pursuant to the U.S. Treasury’s Home AffordableModification Program (HAMP).For second mortgages, the net credit loss and delinquencies of 90 days ormore were relatively stable compared to the third quarter of 2010.For information on Citi’s loan modification programs regardingmortgages, see “Consumer Loan Modification Programs” below.93