Citigroup Selling Second Non-Agency Mortgage Bonds Since Crisis

Citigroup Inc., the bank asked to pay more than $10 billion to settle a U.S. probe into its mortgage-bond sales before the 2008 financial crisis, is planning its second offering since the credit seizure of securities without government backing linked to new home loans.

The new transaction is tied to $219 million of prime jumbo mortgages acquired by the New York-based company’s investment bank, after being originated by lenders led by Stearns Lending Inc. and Nationstar Mortgage LLC, rating firm DBRS Ltd. said today in an e-mailed statement.

Scott Helfman, a spokesman for Citigroup, declined to immediately comment. Citigroup in November sold bonds backed by $210 million of new U.S. mortgages, its first such offering since the crisis, according to data compiled by Bloomberg. The bank has arranged additional sales tied to older loans.

Citigroup joins Premium Point Investments LP’s WinWater Home Mortgage LLC in planning a non-agency mortgage bond sale. WinWater’s offering this week is being managed by JPMorgan Chase & Co. and Bank of America Corp.

After showing signs of reviving from the paralysis caused by the credit crisis, issuance has fallen as banks seek jumbo mortgages to hold as investments and bond buyers demand higher relative yields.

Jumbo home loans are ones larger than allowed in government-supported programs. For Fannie Mae and Freddie Mac loans with the lowest costs for most types of borrowers, limits range from $417,000 to $625,500.

U.S. prosecutors broke off talks with Citigroup on June 9 and were preparing to sue the bank after the lender offered less than $4 billion to resolve the investigation tied to pre-crisis bonds, a person with knowledge of the matter, who asked not to be named because the negotiations are private, said last week.