Citi To Shrink Mortgage Portfolio by $45 Billion

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.

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  1. Anonymous

    Ok… well, what’s the market rate? Citadel bought E-trade’s portfolio for 27 cents on the dollar.

    And the true market rate is nothing… Who’s buying these things?

  2. doc holiday


    Challenges for small open economies in uncertainty

    Friday, 7 March 2008, 2:13 pm
    Press Release: Reserve Bank

    Re: International Symposium at the Banque de France in Paris on 7 March

    Over the past decade, the ‘global savings glut’, generally declining interest rates and a search for yield drove up exchange rates for many small open economies such as Australia and New Zealand, Dr Bollard said. This helped fuel a sharp increase in house prices in many countries, as well as possible collateral damage on exporters.

    “Global interest rate developments have sometimes been ‘out of sync’, lower than domestic conditions warrant, and working against monetary policy, making it spongier, and perhaps less effective at the margin than would otherwise be the case,” he said. “We have not always had an ideal mix of monetary conditions.”

  3. Anonymous

    QUESTIONER: Coming back to the euro, the concern in Europe is the fact that not only is Europe being dragged down by the slowdown in the U.S. economy, but now also by the strength of the euro. Do you think that that is a real concern?
    MR. AHMED: I have already given you view on the monetary stance of the Euro Area which we think is appropriate. Let’s broaden that out and look at the outlook for Europe. As you know, the economy slowed in the last quarter of 2007 to 0.4 percent from 0.8 percent in the third quarter, so there is clearly a slowing going on. Real GDP growth is also projected to decline from around 2 1/2 percent in 2007, to 1 1/2 percent in 2008. In our view what is driving this is higher commodity prices, rising risk premiums, and slowing world growth. But we also think that the risks to this outlook are actually broadly balanced. Over the short term the impact of financial market turmoil remains uncertain, and over the medium term, external downside risks dominate, including global imbalances and uncertainty in oil markets.

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