Citigroup, Inc. announced on Monday that it plans to exit the mortgage servicing operations by the end of 2018. The move is intended to simplify operations and to reduce expenses. This is all in an effort to improve returns on capital for the company.
Credit cards seem to be where it’s at for Citi, as the bank continues to go away from the mortgage industry.
Citi will sell their mortgage servicing rights on 780,000 Fannie Mae and Freddie Mac of non-Citibank retail customers to New Residential LLC, the company said. The remaining Citi-owned loans and any other loans that are not sold to the New Residential LLC will be transferred in 2018 to the loan servicing provider Cenlar FSB.
The lender said they expect the deals to hurt their first-quarter pretax results by about $400 million.
CitiMortgage currently services loans for Citibank and other government-sponsored entities such as Fannie Mae and Freddie Mac.
Citigroup’s mortgage units, including CitiMortgage were just hit with a big fine last week in regards to foreclosure for some of their borrowers. The groups were hit with a $28.8 million fine for keeping their borrowers in the dark about options to avoid foreclosure and also making it difficult for their borrowers to apply for relief.
While mortgage originations did increase by 2 percent in the third quarter, going from last quarter’s $6.4 million to $6.5 million, they increase is still down. Last year the increase was by 13 percent at $7.5 million.
The bank said it plans to make a smooth transition by transferring as many employees as possible along with the new mortgage servicing rights and operations.
“Over the past several years, we have made significant progress transforming our business to deliver a sustainable annuity of growth,” said CD Davies, President and CEO of CitiMortgage. “CitiMortgage remains a critical part of serving our customers, deepening relationships with existing and prospective retail bank clients and driving growth in our core markets. We will continue to originate loans for current and new clients.”
Citibank is the leading global bank with approximately 200 million customer accounts, as well as doing business in more than 160 countries and jurisdictions. Citi provides a wide range of financial products and services, corporate and investment banking, securities brokerage, transaction services and wealth management. The bank has been in business since 1812, when it was founded as the City Bank of New York. It was later changed to First National City Bank of New York.