Citi intends to reduce residential mortgage assets in its US 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, organise sales channels around customer segments, and strengthen ties with Citi Markets & Banking, which will be the primary provider of capital markets services to its US mortgage business going forward. Citi expects these changes to reduce expenses by approximately $200 million on a run rate basis within 12 months.
In January, Citi created an end-to-end US residential mortgage business that includes origination, servicing and capital markets securitisation execution headed by Bill Beckmann.
As part of that change, Citi will consolidate operations, policies and procedures in its US mortgage business to achieve greater operational efficiency, appropriate alignment of incentives and ensure in-depth, timely understanding of mortgage exposure. Citi will also integrate all residential mortgage operations under the CitiMortgage name, including CitiMortgage, Citi Home Equity and Citi Residential Lending.
“Consistent with the key priorities of Citi Chief Executive Vikram Pandit, this end-to-end realignment will create a simplified and streamlined organisation that is more sharply focused on clients and able to direct resources to the business lines and customer segments with the highest growth potential. At the same time, these changes will enable us to manage the business unit’s capital for enhanced returns,” says Beckmann.