From SeekingAlpha here’s Vikram Pandit on the conference call talking foreclosures:
During the quarter, we sold $1 billion in delinquent mortgages. And through the end of the third quarter, we had converted a total of $4.1 billion of HAMP trial mods to permanent modifications. We continue to see encouraging results for HAMP modified loans, indicating that redefault rates for HAMP mods will likely be lower as compared to non-HAMP programs.
Beyond HAMP, there are obviously several other mortgage-related issues that are getting a lot of attention in the market recently. Much of the concern seems to be focused on three main issues. First, the validity of the securitization process as it relates to the legal transfer of loans. Second, the foreclosure documentation or a robo-signing issue. And finally, the potential for losses related to reps and warranties on loans sold to both GSEs and private investors.
Regarding the validity of securitization, while there has been a lot of speculation on this topic, we believe based on our review with our counsel that the well established securitization loan transfer processes are an effective means to transfer ownership in the mortgage loans. We note that the American Securitization Forum released a statement on Friday affirming their view that securitization processes are sound.
On the second issue regarding foreclosures, as we have been saying publicly, we continuously view our document handling procedures and we believe the integrity of Citi’s foreclosure process is sound. While we use external attorneys to prepare documents, each package is reviewed by a Citi employee who verifies the information and signs the foreclosure affidavit in the presence of a notary. When errors are found, the documents are returned to the attorney who revises the package and resubmits the documents for review. We have intensified our ongoing process reviews, and on that basis, have not identified any systemic issues.
And on repurchases:
In the centre. we show the claims experience for our consumer mortgage business. The unindemnified portion of the servicing portfolio is comprised of approximately 2.5 million loans. From 2008 through the third quarter of 2010, we received claims on a total of approximately 17,500 loans. Currently, nearly 4,700 of those claims remain pending. Of the approximately 12,800 resolved claims, roughly 6,300 or around 50% were actually repurchased or made whole. In the third quarter of 2010, we received claims on roughly 2,000 loans, up from 1,800 in the third quarter of last year and down versus nearly 2,800 in the second quarter of 2010.
Slide 22 shows a roll-forward of the repurchase reserve for our consumer mortgage business. We closely monitor initial requests for documentation, claim rates and rescission rates in order to establish appropriate repurchase reserves. We began the third quarter with approximately $727 million of repurchase reserves. We added approximately $3 million of reserves arising from new mortgage sales in the third quarter and another $322 million related to changes in our estimate of potential future repurchase activity. These additions to the reserve were charged to our P&L during the quarter as contra revenue.
We realised approximately $100 million of losses related to repurchases and make-wholes during the third quarter. This $100 million was charged against the reserve. As a result, we ended the period with $952 million in mortgage repurchase reserves. In addition to our consumer mortgage activities, our Securities and Banking business also securitized mortgages. The Securities and Banking mortgage activity represents a smaller portion of our overall mortgage business as compared to the consumer business we just discussed.
During the period 2005 through 2008, Securities and Banking issued approximately $70 billion in mortgage-backed securities, of which approximately $30 billion remains outstanding. As a general matter, these mortgage securitizations include mortgages that were purchased from third parties not originated by Citi. Additionally, Citi does not service the vast majority of these loans. To-date, we have not received significant mortgage repurchase claim request relating to the loans in these securitizations. But obviously, this is something we will continue to monitor closely.
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