On Monday, New York-based lender Citigroup Inc said in a statement it would accelerate the reformation of its US mortgage business by withdrawing its servicing operations by the end of 2018.

In particular, Citi reached a deal to sell its mortgage servicing rights on about 780,000 Fannie Mae and Freddie Mac loans with $97 billion of outstanding balances of non-Citibank retail customers to New Residential Mortgage LLC (NRZ). The remaining Citi-owned loans and other mortgage servicing rights not sold to NRZ are anticipated to be transferred next year instead to Cenlar FSB [CENLR.UL], a loan servicing provider.

The sale to NRZ is set to be completed in the first half of 2017. The bank said it projected these plans and agreements to hurt first-quarter pre-tax results by roughly $400 million, which includes a decline on sale and select associated transaction expenses.

Selling its mortgage servicing rights is intended to simplify CitiMortgage's operations, lower costs, and improve returns on capital as the firm shifts its focus on mortgage originations. CitiMortgage services mortgage loans for Citibank and government-sponsored entities like Fannie Mae and Freddie Mac.


Citi's mortgage units, including CitiMortgage, were fined $28.8 million in the prior week for misleading home borrowers regarding the options to avoid foreclosure and making it tough for them to apply for relief.

Based on Citi’s fourth-quarter earnings report, the company’s mortgage-servicing rights were worth $1.6 billion at the end of 2016, down from $6.5 billion at the end of 2009. The investment banking firm generated $371 million in fees from servicing securitized mortgages in the first nine months of the previous year, lower compared with $416 million in the same period of 2015.

The Citi stock ended the last session with a loss of 0.44% or $0.25 to trade at $57.05. It extended losses further in today’s premarket hours, shedding 0.91% at $56.58.

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