Global financial services company Citi plans to reduce residential mortgage assets in its U.S. mortgage business by approximately $45 billion over the next 12 months – a 20% decrease from December 2007 levels – and will cut the amount of new loans to be held in portfolio by more than 50% in the next year.
In addition, the company will integrate middle office and support areas to serve both first- and second-mortgage operations, organize sales channels around customer segments and strengthen ties with Citi Markets & Banking, which will be the primary provider of capital markets services to its U.S. mortgage business going forward.
Citi expects these changes to reduce expenses by approximately $200 million on a run-rate basis within 12 months.
According to the company, other plans for strengthening its mortgage business include reducing the amount of portfolio lending and reducing capital and credit exposure. CitiMortgage (which will now encompass all of the firm's mortgage business) intends to increase the level of loans sold to agencies or securitized to approximately 90% of production by the third quarter of this year. The company has tightened underwriting criteria and eliminated high-risk product offerings as well.