Citigroup Says Bank Will Exit Mortgage Brokerage Business
Citigroup Inc. (C), the third-largest U.S. lender by assets, plans to stop using brokers to originate mortgages and probably will cut jobs as it exits the business while banks grapple with the fallout from the housing collapse.
Most of the 300 employees tied to the brokerage business will be reassigned and job “discontinuances” may be in the “low double digits,” according to e-mails today from Mark Rodgers, a spokesman for the New York-based bank. Citigroup will focus on its own retail and correspondent channels, he said.
Lenders including JPMorgan Chase & Co. and Bank of America Corp. (BAC) have stopped offering mortgages through brokers after lax practices among people signing up borrowers helped create bad loans and fueled losses. Citigroup originated $67.9 billion of mortgages in total in 2011, 8.6 percent of which came from brokers, according to trade publication Inside Mortgage Finance.
“Making this decision now affords us the opportunity to better serve the financial needs of our customers,” Rodgers said. “We anticipate the majority of our employees within the broker channel will be transitioned to similar roles within the business.”
Citigroup advanced 2.9 percent to $31.60 in New York today. The shares have gained 20 percent this year, after slumping 44 percent in 2011.
The bank’s share of the $1.3 trillion U.S. mortgage origination market fell to 5.7 percent at the end of 2011 from 8.1 percent at the end of 2007, when Vikram Pandit was named chief executive officer, according to Paul Miller, an FBR Capital Markets analyst. Citigroup’s mortgage unit is run by Sanjiv Das.
Wells Fargo & Co., the largest originator, almost doubled its share to 30.1 percent during the same period. JPMorgan, the second-largest originator, fell by almost one-third to 10.4 percent while Charlotte, North Carolina-based Bank of America fell by almost three-quarters to 5.6 percent, Miller said.
To contact the editor responsible for this story: Rick Green at firstname.lastname@example.org