Citigroup Exiting Business of Servicing Mortgages -- Update
January 30 2017 - 7:25AM
Dow Jones News
By Christina Rexrode
Citigroup Inc. on Monday said it would exit the
mortgage-servicing business, turning its focus to mortgage
originations.
The bank said it is selling servicing rights of about 780,000
mortgages backed by Fannie Mae and Freddie Mac to a unit of New
Residential Investment Corp. New Residential, managed by an
affiliate of Fortress Investment Group, said it is paying about
$980 million.
Citigroup said the exit from mortgage servicing would reduce its
first-quarter pretax results by $400 million, including a loss on
the sale and other transaction costs. The bank said the move allows
it to focus on originating mortgages, cut expenses and improve
shareholder returns.
The mortgages underlying the deal are to borrowers who aren't
Citigroup bank customers and represent about $97 billion in
principal mortgage balances. The deal will to require approval from
Fannie, Freddie and their regulator, the Federal Housing Finance
Agency.
Citigroup also said it outsourcing the servicing of remaining
customer mortgages to Cenlar FSB, a privately owned
mortgage-subservicing company.
The move is aligned with both industry trends and Citigroup's
recent history.
Some banks have been shrinking their exposure to the
mortgage-servicing business because of increased regulatory
scrutiny and costs. And New York-based Citigroup has been exiting
businesses since the financial crisis nearly toppled it.
In mortgages, the bank has been moving toward doing business
with just existing customers in the U.S. cities where the bank has
branches. Citigroup's mortgage-servicing portfolio is half the size
that it was a decade ago, according to the trade publication Inside
Mortgage Finance.
Still, Citigroup is the sixth-largest mortgage servicer in the
U.S., and its exit from the business is another signal of non-banks
gaining ground in both mortgage originations and servicing.
Write to Christina Rexrode at christina.rexrode@wsj.com
(END) Dow Jones Newswires
January 30, 2017 07:10 ET (12:10 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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