Citigroup Plans to Expand Mortgage Lending, Fraser Says

Citigroup Inc. is seeking to reverse the contraction of its U.S. mortgage business, partly by increasing purchases of home loans from other firms, according to Jane Fraser, who oversees the lending.

“We want to grow,” Fraser, the head of U.S. consumer and commercial banking for Citigroup who also runs its home-loan unit, said today in a speech at a conference in New York. “We think today we are below our natural market share” based on the size of its banking business.

Citigroup’s portion of U.S. mortgage originations fell to 3.4 percent last year, when it ranked No. 6, after the company scaled back following losses and legal settlements amid the worst housing crash since the Great Depression, according to newsletter Inside Mortgage Finance. The New York-based bank’s market share was 8.1 percent at the end of 2007, when it ranked fourth.

The effort to expand Citigroup’s share of a market curbed by higher interest rates, consumer aversion to debt and new regulations will include a renewed focus on buying mortgages from correspondent lenders, Fraser said. It plans to use its balance sheet to hold loans as part of the push, she said.

‘Extremely Careful’

While the bank will be “extremely careful” with the quality of its lending, “Citi is no longer reacting to the crisis,” Fraser said at the Mortgage Bankers Association conference. “It’s a strategy agreed to with our senior management and our board, and they’re comfortable with it.”

Fraser was named head of CitiMortgage in May 2013 after running the lender’s private bank for four years. A former McKinsey & Co. consultant, Fraser joined Citigroup, now the third-largest U.S. bank by assets, in 2004.

Sanjiv Das, the former Citigroup mortgage head Fraser replaced, made similar comments in 2010 about the bank’s goals, saying in an interview that it had decided mortgages were a “core” product.

The company agreed in 2012 to a $158.3 million settlement and admitted wrongdoing in response to a U.S. Justice Department lawsuit that alleged that, even during the housing crash, Citigroup had internal “gatekeepers” urge loan-quality employees to change their reports.

Correspondents’ Practices

The practices of Citigroup’s correspondent mortgage business in the housing boom also have drawn scrutiny. Richard Bowen, the former chief underwriter for its consumer-lending group, told the Financial Crisis Inquiry Commission in 2010 that he determined in mid-2006 that more than 60 percent of mortgages that Citigroup bought from other firms and sold to investors such as Fannie Mae and Freddie Mac were “defective.”

Fraser said today that being bigger in mortgages can help Citigroup win wealth management and banking business.

“It’s not just one of customers’ largest transactions, it’s one of their life events and we want to get good at that,” she said.

In March, C.D. Davies, a former head of mortgage units at Wachovia Corp. and Capital One Financial Corp., joined CitiMortgage as head of originations in North America, Mark Rodgers, a spokesman, said today in an e-mail.

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