CitiMortgage Wholesale Lending - Prime, Agency

Update - 2009-06-23: Citi has informed its Correspondent Lender clients of an 8-day suspension of new loan registrations while it "re-engineers" its QC process, citing numerous file deficiencies.

"CitiMortgage has taken great measures through our Star Performance program to focus on the quality of loans we purchase. While this program has been successful, there remain key areas that sometimes fall short of our quality control process."

The list of shortfalls is nothing short of egregious, including missing pages of credit reports, missing income or asset documentation, and appraisals either incomplete or lacking in methodology.

New loan registrations will resume on 2009-07-06 subject to more stringent review, and purchases will continue in the interim. The memo goes on to reiterate Citi's commitment to Correspondent business:

"This brief stay will provide us with the necessary time to reengineer our critical control processes and ensure, going forward, all quality control measures are passed, which will allow us to continue to be a long-term recognized Industry investor."

One Lender we spoke with had three hours notice to lock their loans, or have them returned. AE's were forced to tell Brokers they could not accept any Conventional Conforming loans, usually the bread-and-butter of the industry. It leaves one to wonder at what point did Citi suddenly realize these critical components had been routinely missing from loans they had purchased -- and for how long.

Update - 2009-01-23: We had heard rumors earlier in the week that Citi would be cracking down on some third-party correspondent lenders, but the way it seems to be being handled is going to hurt a lot of correspondent/conduit lenders, as well as their respective broker clients and borrowers.

Apparently, one of the first victims was Just Mortgage, Inc., added to our Ailing/Watch list today. As we have it from an inside source, they were told in a conference call on Thursday, 2009-01-22, that Citi would not be honoring any locks or funding any TPO's effective immediately. The result of that was thousands of locked and some even funded loans that had not yet been shipped for purchase became suddenly undeliverable to Citi. Just Mortgage and their brokers were forced to scramble to resubmit and re-lock with other investors, and absorb the loss in worst-case pricing.

Posted on a discussion thread about Citi, one correspondent broker (company not identified) added this in confirmation:

"As a customer, we can confirm that Citi has indeed stopped purchasing any corr loans originated via tpo. This applied immediately, including even locked and funded-but-not-purchased loans."

One forum poster indicated Citi had instituted a "grading scale" to weed out its client base in an effort to improve performance:

"Not all correspondent lenders got cut off by Citi. Citi developed a scorecard that analyzes 10 or so factors and each correspondent is graded.

We'll be watching closely as this plays out for other correspondents who were dependent upon Citi as their TPO investor. Citi has every right to make efforts to improve the profitability of their business channels, but to do so by cutting off clients with no forewarning and refusing to honor locks or purchase funded loans strikes us as an incredibly callous and highly unprofessional business practice in its application. As one one of the above posters stated, "This unannounced move by Citi [could] well put other companies out of business immediately."

With Chase backing out of Wholesale, Citi axing without warning, and rumors of Wells to follow suit, the mortgage industry from the Broker to the Investor level is suffering a loss of faith (and trust) from the top down.

Perhaps someone let go of the wheel while passing the reins; Derr, Thomas Rubin out... Parsons coming in... the vivisecting of the company... the resulting fallout surely will be considered a mistake in the near future. We can see no upside to Citi's actions.

Update - 2008-10-07: Several of the letters sent to brokers by Citi AE's refer to a decision to downsize the company's existing base of 9,500 brokers nationally to just 1,000 "strategic partners." The notices began to roll out to those 8,500 broker shops late this afternoon, suspending Citi's broker agreements effective Friday, October 11th. View a copy of one such notice here.

Original Ailing Listing - 2008-10-07: Emails are coming in from all over the country that CitiMortgage is closing it's Wholesale Lending division. AE's are sending out messages to Brokers saying goodbye, or calling to say they were let go today.

"CitiMortgage has announced today that it has made the decision to re-structure it's Wholesale business model by continuing the Wholesale Division without local account representation. Our nationwide sales efforts will be handled by an inside group of dedicated individuals committed to bringing the best products and services to our valued brokers."

In the 'now typical' fashion of closing shop, it appears first Lenders let go the outside reps and tell everyone you are moving to an 'in-house' system. In reality this has turned out to be "the clean-up crew" more often than not. It seems like Citi has done this in the past with First Collateral Services, and their Home Equity division.

"Citimortgage closes wholesale" came in from one AE, but on a conference call today, Citi says the entire outside sales team including management will be let go (last day will be Friday) except for those they keep for their "tele-sales" business.

From a tip:

"Citi is drastically restructuring our wholesale operations, moving to a call center approach and scaling back from 9,500 approved wholesale brokers to 1,000 brokers. All outside AEs are losing our positions and the remaining brokers will be serviced through call centers out of Dallas, TX, Ann Arbor, MI and St Louis, MO. All brokers will be notified this afternoon if business will end or if you are able to continue to work with Citi under the new structure."

We'll post more information as it comes in... join in our Discussion Forum for updates throughout the day.