nico Any Insight? "Citi shakes up its Mortg Biz"

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Posted - 01/09/2008 : 10:58:55 AM

from yesterdays NY Times:

http://dealbook.blogs.nytimes.com/2008/01/08/citi-shakes-up-its-residential-mortgage-business/

Citigroup, badly bruised by the sharp downturn in the housing market, is bringing together all of its mortgage-related activities under one roof.

In an internal memorandum released Tuesday afternoon, Citi appointed Bill Beckmann to create a new U.S. Residential Mortgage business, which will issue, package, and collect payments on home loans. Those activities previously had been conducted by separate units within Citi’s consumer and investment bank.

The move is one of the first major actions taken since Vikram S. Pandit took over as chief executive last December and could foreshadow another shake-up of its consumer bank. Read more, including the memo, after the jump.

The goal, executives say, is to create one end-to-end business that a common set of products, underwriting policies, and back-office functions that will better allow Citi to assess risk and reduce costs. It is unclear how many jobs will be eliminated or what the final structure of the new unit will look like. Executives provided no timetable for the plan.

The announcement may also pave the way for Citigroup to run its mortgage operations more like its big credit card division — as a single, product focused group separate from its international and consumer banking units. And it could signal another step down the path of widely-discussed plans to put Citi’s consumer operations with its Smith Barney brokerage under a single leader. Such a “consumer distribution-oriented” structure would mirror what Mr. Pandit did at the investment bank, when he combined it with its alternative investment unit to create the “Institutional Clients Group.” No final decisions have been made, and executives say all options are on the table.

Citigroup has long been a major player in the mortgage business and one of the biggest issuers of subprime home loans. But so far, mortgages issued by its consumer bank have performed much better than those bought and packaged by its investment bankers, executives said. In Mr. Beckmann, Citi is turning to an experienced banker who only a year ago helped merge its subprime (CitiFinancial) and prime mortgage operations (CitiMortgage) together in its consumer bank.

For some, the move may also be a repudiation of a decision made by Citigroup’s investment bank to buy the remnants of ACC Capital Holdings, including its troubled subprime mortgage wholesale unit known as Argent and its debt collection arm.

Internally, the purchase was seen by many Citi bankers as “catching a falling knife.” But others suggested that Argent could be retooled under the Citi brand.

‘’It is not going to be a subprime shop,'’ said Jeffrey A. Perlowitz, the head of the global securitized markets division of Citigroup’s investment bank at time time. ‘’It is going to be a nonconforming shop and we are going to originate along the continuum, from jumbo loans to Alt-A to subprime.'’

Others, however, see the reorganization as a natural outgrowth of the deal. Along with Argent, Citigroup bought one of the industry’s biggest and most efficient debt collection operations. That know-how and scale could become increasingly important as thousands of American borrowers are expected to fall behind on their mortgage payments this year.

For now, Citigroup consumer businesses will retain their origination activities. Citi Residential Mortgage, the business operated by its investment bank, will be folded into the new group. More details follow in the full memo below:

To: All U.S. Employees
Cc: Senior Managers
From: Jamie Forese and Carl Levinson
Date: January 8, 2008
Re: U.S. Residential Mortgage Business

We are pleased to announce that Bill Beckmann will assume a new role, responsible for the creation of an end-to-end U.S. residential mortgage business that includes origination, servicing and capital markets securitization execution. Bill will continue to report to Carl Levinson, head of the U.S. Consumer Lending Group and add a joint reporting relationship to Jamie Forese, Co-CEO of Markets & Banking (CMB).

Aligning our existing U.S. mortgage businesses in this way will improve their overall effectiveness and allow us to better serve our existing clients while providing greater value to our shareholders. Importantly, this new structure will permit us to develop:

* Uniform products, policies and practices for mortgage offerings;
* Portfolio and capital objectives focused on reducing mortgage exposure, especially in higher-risk segments;
* A single P&L for mortgage-related activities;
* Best practices with respect to pricing, risk management and return analytics;
* Consolidated and streamlined functions; and
* A more consistent face to our clients, regulators and other stakeholders.

In this role, Bill will work closely with Jeff Perlowitz, the CMB head of Global Securitized Markets (GSM), to determine how to best integrate Citi Residential Lending’s origination and servicing functions and those in CitiMortgage. Mortgage origination activities of CitiFinancial, Citibank and Smith Barney branches will remain with those business entities.

This new structure for our mortgage businesses will allow Bill and Jeff to design the best model to ensure highly effective and coordinated Capital Markets analytics, risk management and execution across non-agency products, areas that will now report jointly to Jeff and Bill. All other GSM businesses will continue to report solely to Jeff.

Bill will also work closely with Corporate Treasury with respect to dimensioning overall portfolio, capital objectives and required return hurdles.

Please join us in wishing Bill well in his new role.

taracummins

1669 Posts

Posted - 01/09/2008 : 11:29:47 AM

You may want to email Nico. He said he doesn't come around as much since email notification got lost in migration.

2986 Posts

Posted - 01/09/2008 : 11:33:11 AM

quote:
Originally posted by taracummins

You may want to email Nico. He said he doesn't come around as much since email notification got lost in migration.

Maybe I should call HR Department, see if he still has a job?