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Citigroup Sells Bonds of Lone Star-Managed Delinquent Mortgages

Citibank headquarters in New York
A Citi logo appears on a sign above a Citibank branch in the ground floor of Citigroup Inc. headquarters in New York. Photographer: Daniel Acker/Bloomberg

Citigroup Inc. has been leading a sale of securities backed by $356.9 million of mostly delinquent or previously past-due home loans, according to data compiled by Bloomberg.

The amount of bonds backed by the mortgages made by CIT Group Inc., an average of 51 months ago, total $132 million, the data show. The private-placement transaction may close today, according to the data.

Vericrest Financial Inc., part of the former CIT home-lending unit bought by Dallas-based Lone Star Funds, will be the mortgage servicer, the data show. Lone Star, the investment firm started by John Grayken in 1995, was among the distressed- mortgage buyers and sellers that last year attempted to use securitizations to finance or dispose of holdings.

“Securitization is certainly a vehicle for those loans,” Laurie Goodman, an analyst in New York at mortgage-bond broker Amherst Securities Group LP, said today in a telephone interview. “The reason there hasn’t been more done is there hasn’t been a lot of the stuff sold.”

Ed Trissel, a spokesman for Lone Star, Danielle Romero-Apsilos, a spokeswoman for New York-based bank Citigroup, and Curtis Ritter, a spokesman for New York-based lender CIT, didn’t immediately return telephone messages.

The deal was reported earlier by Informa Global Markets.

Lone Star agreed to buy CIT’s mortgage unit and assets for $1.5 billion in July 2008, CIT said at the time. In September, Lone Star planned to sell $239 million of securities backed by CIT-originated loans in a deal led by Bank of America Corp., people familiar with the matter said then.

Bond Sale

Citigroup and American International Group Inc., the insurer bailed-out by the U.S. government, were among companies that last year issued and sold securities backed by older mortgages even as the market for so-called non-agency bonds composed of new loans remained shut amid the worst U.S. housing slump since the Great Depression.

In April, Citigroup and Redwood Trust Inc. partnered to create the first new-mortgage securities without government-backed guarantees in more than two years, packaging $237.8 million of so-called jumbo loans.

The most-senior class of the latest deal, totaling $35.7 million, received DBRS Inc.’s fourth-highest credit rating, Bloomberg data show. Royal Bank of Scotland Plc and Wells Fargo & Co. co-managed the sale with Citigroup.

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