Citi Is Planning to Sell $45B of Mortgage Assets

Citigroup late last month disclosed plans to reduce its on-balance-sheet mortgage holdings by $45 billion over the next year or 20% of its total portfolio.

Officials in Citi's mortgage division told Mortgage Servicing News that the company will achieve the reduction through normal portfolio run-off but also will sell and securitize at least some of its holdings.

"We hope a majority of it will be through run-off," said one company executive.

CitiMortgage president Bill Beckmann said the banking giant hopes to increase its sales of loans to Fannie Mae and Freddie Mac. (A majority of its conventional production goes to Fannie.)

Citi also clarified that it will remain a retail, wholesale and correspondent lender but will no longer buy mortgages in bulk packages. "We will buy only on a flow basis," said one company executive.

Its minimum FICO score is now 580 and the company has eliminated what it calls "higher-risk products" including 2/28 and 3/27 ARMs. It also will no longer fund investor properties on three- and four-unit rentals.

Citi also is reorganizing and will place all its lending-related divisions under CitiMortgage in O'Fallon, Mo., Mr. Beckmann's unit. It declined to offer any estimates on potential job reductions.

Citigroup hopes that all these changes will save it $200 million over the coming year.

According to the Quarterly Data Report, CitiMortgage is the nation's fifth largest residential lender and third largest servicer. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/