The retreat from the mortgage market continues. Not surprisingly, no one wants to lend to high-risk borrowers that are now having trouble paying.
Notice also that Citi plans to sell a high proportion of its new mortgages to Fannie and Freddie.
From the Financial Times:
Citigroup is to shrink its $200bn-plus mortgage portfolio by a fifth in an effort to reduce its reliance on low-growth assets and free up capital to bolster its finances.
The US financial services group is also planning to move the bulk of new loans off its balance sheet by securitising them or selling them to Fannie Mae and Freddie Mac, the government-sponsored mortgage financiers…
Bill Beckmann, the head of the enlarged mortgage business, told the Financial Times that the planned $45bn reduction in mortgage assets would help Citigroup to reduce risk and release capital for investments in faster-growing businesses.
Mr Beckmann added that most of the reduction would come from repayments of existing loans but said that Citigroup would also explore the sale of some loans.
He said that, by the third quarter of this year, 90 per cent of new mortgages originated by Citigroup would either be securitised or sold to Fannie and Freddie – a move that was expected to reduce the company’s capital and credit exposure.
Over the past year, as housing woes have deepened, Citigroup has been reducing its mortgage portfolio.
The company’s volume of outstanding mortgages, which stood at $286bn in the first quarter of 2007, fell to $232bn in the last three months of the year.
The annual rate of growth in mortgage origination has also declined from 19 per cent at the beginning of last year to 11 per cent in the last quarter.
However, Citigroup’s mortgage book remains 30 per cent higher than at the beginning of 2006.