Citigroup suspends mortgage applications
Filed under: Company News, Economy
Still trying to get it right, Citigroup suspended mortgage applications from outside mortgage brokers on June 22, citing problems with property appraisals and income-verification documents -- problems that were rampant during the inflation of the real estate bubble.
Citigroup (C) plans to review its processes and reeducate its underwriters before taking applications again on July 6. During that time mortgage brokers will need to work with other lenders.
"You need to have a hard stop," David Lykken, a managing partner of Mortgage Bank Solutions, told Bloomberg. "It is better to pull people off the line, and have a thorough reeducation of what goes into a loan, so they can come back and do this the right way."
During this hard stop, brokers who are trying to place loans will have to go to Citigroup's competitors, but that could be a difficult prospect unless they already have a good working relationship. All banks have tightened their rules and are much more picky about which brokers can place loans. JP Morgan Chase (JPM) was the biggest correspondent lender last year with $98.7 billion of loan originations. Wells Fargo (WFC) was second with $80.5 billion.
Last October Citigroup cut off all but 1,000 of the 9,500 brokers in its network because the bank said these outside mortgage brokers made loans of poor quality or in insufficient volume to be profitable. The company also stopped making second-lien mortgages through third parties. Anyone who wants an equity line or other type of second-lien product form Citigroup must apply directly to the bank. As of December 31, the bank had $73 billion of mortgages that were generated by its broker network or correspondent division.
This hard stop could be a way to review the work of brokers and possibly drop some others whose loan submittals do not meet the quality standards set by Citigroup. As the banks reduce the number of mortgage brokers out there, they continue to reduce the competition for mortgage options.
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Reader Comments (Page 1 of 1)
6-24-2009 @ 10:33AM
Biff Jones said...
Will Citigroup ever see 20 again?
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6-24-2009 @ 3:52PM
Donovan said...
Now lets be honest. How many Realtors tell an appraiser " I need this property to appraise for X amount of dollars" and slip the appraiser $100.00 to get that magic number. The same applies for home inspections. As all a home inspector needs, is to get black listed for killing a few sales due to TMI on a report. And they find themselves out of work.
Its just Real Estate politics. If the banks start sending out their (own employed) appraisers and home inspection personal. Real Estate agents had better start looking for a part time job to supplement their income.
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6-24-2009 @ 7:10PM
E. Earnhardt said...
Yep, realestate agents had a part in the housing boom .
6-24-2009 @ 7:10PM
Forrest Freedman said...
Now I understand the intracies of high finance. Citicorp convices the Federal Government to make loans to bail itself out from bankruptcy because its a bank thats to big to go under, but Citicopr is free to stop making loans which is the purpose of banks to screw consumers.
Thanks President Obama for making this financial SNAFU a reality. Maybe you want to pass tax breaks for Bank CEOs to so that they can keep more of their salary raises as well!!
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6-25-2009 @ 9:16AM
Donovan said...
The banks are being very conservative with their home value appraisals these days. I had thought about selling my home, so I interviewed three Realtors, and each gave one came up with a very different market value listing price. The high side being $600,000 and the low being $525,900 I also needed to pull a home equity loan on my home in order to purchase another property. Well, the bank sent out its own mortgage appraiser, and he appraised my home at $475,500 Now considering my home was built brand new in 1999 at a final cost of $389,952 and since then we put in over $150,000 adding an in ground 20 x 45 heated pool, finishing the basement, custom 6' privacy fencing for a 1/2 acre back yard, extensive landscaping, all custom window treatments etc, etc. I was in nothing less then shock with, this guys low ball appraisal. However, the bank appraisers job is to protect the banks investment first and foremost.
Long story short. I would suggest to anyone looking to buy a home these days. To have an appraisal contingency in your contract, that stipulates. That for any reason the appraised value of the home you made an offer on, comes in lower. That you then have the option of canceling your contract for purchase, if the seller is unwilling to renegotiate the sales price. If not, you'll need to be fully prepared to make up the difference in your initial down payment.
In all fairness to both buyer and seller. The sooner your lender/bank appraises the property, and you have the home inspection completed, the better.
Some buyers are now insisting on having the home inspection done prior to even making an offer. This does not always fly well with the seller, or the sellers agent. But it can save you the buyer, a great deal of money and aggravation in the long run. It also helps in knowing what possible (costly major) repairs the home may need, prior to making your offer.
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