The Gulf Time Newspaper One of the finest business newspapers in the UAE brought to you by our professional writers and editors.
Bloomberg
Citigroup Inc. plans to exit the mortgage-servicing business by the end of 2018 to focus on making new loans. The bank reached an agreement to sell the servicing rights on Fannie Mae- and Freddie Mac-backed loans with $97 billion of outstanding balances to New Residential Mortgage LLC, New York-based Citigroup said Monday in a statement. The bank also reached a deal with Cenlar FSB to service its remaining mortgages, and plans to transfer the rights for those loans beginning in 2018.
The sale to New Residential, which is subject to regulatory approval, is expected to be completed in the first half of 2017. Citigroup said the agreements will reduce pretax results by about $400 million in the current quarter. Expense benefits will start to accrue in 2018, according to the bank.
“The strategic action is intended to simplify CitiMortgage’s operations, reduce expenses and improve returns on capital,†the company said in the statement.
Mortgage servicers handle the billing and collections on home-loan payments and oversee foreclosures. Banks have pulled back on their servicing units, as costs for the businesses rose and regulatory pressure intensified. Earlier this month, Citigroup agreed to pay $28.8 million to settle allegations by U.S. regulators that two of the bank’s mortgage-servicing units misled borrowers.
Citigroup’s mortgage-servicing rights were worth $1.6 billion at the end of last year, down from $6.5 billion at the end of 2009, according to the company’s fourth-quarter earnings statement. The bank produced $371 million in fees from servicing securitized mortgages in the first nine months of last year, down from $416 million in the same period of 2015.