Citigroup reported a 50% jump in residential mortgage originations in the third quarter along with a large writedown related to mortgage servicing rights.
Citi's North American consumer banking unit originated $17 billion in 1-4 family loans in the third quarter, compared to $11 billion in the prior quarter, according to the bank's quarterly earnings report released Monday morning.
While declining mortgage rates spurred originations, it forced the New York-based bank to write down the value of its MSRs by 33% to $2.85 billion.
The bank did not sell any MSRs during the quarter.
Meanwhile, Citigroup continues to reduce legacy assets it placed into a separate unit called Citi Holdings, which has $289 billion as of Sept. 30, down from $827 billion in 2008.
Citi has been "aggressive" in reducing its legacy assets and particularly its exposure to the U.S. housing market by selling mortgages, Citigroup chief executive Vikram Pandit told investors and analysts Monday during a conference call.
Citi Holdings had $70 billion in first mortgages at the end of the third quarter, which is down 18% from a year ago. Delinquencies and net credit losses continued to decline in the third quarter.
However, the decline in delinquencies was driven entirely from asset sales and early bucket delinquencies are beginning to increase -- reflecting re-defaults in previously modified mortgages, according to the bank's chief finance officer.
"As a result of these emerging trends, we could begin to see increasing delinquencies and net credit losses in the first mortgage portfolio," the CFO told investors and analysts Monday during a conference call.
He also noted that further price declines are possible due to continued economic uncertainty and high unemployment.
"We remain concerned about the U.S. housing market," Pandit said.
