Citigroup revives mortgage lending

New York : Citigroup, the bank 27 per cent owned by the US government, will ramp up purchases of mortgages underwritten by other firms and keep more loans on its balance sheet after reversing a plan to scale back home lending.

Citigroup has decided mortgages are a "core" product alongside consumer-banking staples savings accounts and credit cards, Sanjiv Das, who heads the New York-based lender's US mortgage business, said in an interview on Friday.

Citigroup CEO Vikram Pandit shifted the CitiMortgage unit into a new Citi Holdings division in January 2009 along with other "non-core" businesses tagged for sale, wind-down or restructuring.

"In order to be a full-service consumer bank, we had to be able to offer mortgages to our customers" Das said.

"Then, we said, let's now start to rebuild this business."

Losses on home loans and writedowns on mortgage-backed bonds helped saddle Citigroup with a record 2008 net loss of $27.7 billion (Dh101.6 billion) and the bank reduced residential lending to stanch further losses.

Spurred growth

Pandit said earlier this month he's looking for ways to spur growth in the consumer, corporate and investment-banking businesses he plans to keep.

Citigroup, which got a $45 billion taxpayer bailout in 2008, last year repaid $20 billion, and the Treasury converted the remaining $25 billion into 7.7 billion common shares.

Pandit said earlier this month that the bank, whose net loss narrowed to $1.6 billion last year, is well-positioned to return to profitability, driving up the company's stock price.

The Treasury's shares are now worth $30.5 billion.

To win more business, Das said he cut rates last week on "jumbo" loans — those of more than $417,000 in most areas — by one percentage point to 5.875 per cent.

The offer applies only for loans sold through branches and the bank's website, he said.

Some of the newly underwritten jumbo loans will be held on the bank's balance sheet, he said.

Since the mortgage crisis hit, O'Fallon, Missouri-based CitiMortgage had mostly operated with an "originate-to-sell" strategy, where loans were sold to government-owned mortgage-finance companies including Fannie Mae and Freddie Mac.

Intentions

In November, Citigroup Vice Chairman Edward "Ned" Kelly said the bank's "intention going forward" was "selling rather than retaining" new loans.

CitiMortgage also plans to double to about 300 the number of smaller banks and independent mortgage companies it's willing to buy loans from, Das said.

Such companies, known as correspondent lenders, will be screened using a "scorecard" grading them on the performance of loans they previously sold to Citigroup, Das said.

Das reports jointly to Citi Holdings CEO Michael Corbat and Manuel Medina-Mora, whom Pandit named earlier this year to take over responsibility for Citigroup's North American consumer-banking business from Teresa "Terri" Dial.