Citigroup -- Loss Mitigation Follies

Citigroup (C) announced Q4 results and the anticipated loses. No one expected black ink. They make a big point about repaying TARP loans. They also make a big point about net new credit extended to the consumer. Then of course they discuss their credit losses. This is what will drive future profitability and they are controlled by government programs and definitions.

Citi makes frequent use of the term loss mitigation. This is highly sanitized terminology that can mean anything from credit collection to foreclosures and power of sale proceedings. Read this snippet that is found under Citi Holdings

” Net credit losses in North America residential real estate lending declined 7% sequentially to $2.1 billion due primarily to lower losses on second mortgages reflecting the impact of portfolio re-positioning and loss mitigation. In addition, increasing volumes of trial modifications of first mortgages under the HAMP contributed to the sequential decline in losses; the loan loss reserve was increased to offset this impact. “

It is impossible to hold the management to accountability when this kind of manoeuvre is permissible. Portfolio repositioning and loss mitigation. This comes dangerously close to admitting it’s just a shell game.