Citigroup Inc. will no longer purchase "medium or high-risk" loans that could result in buyback requests from Fannie Mae or Freddie Mac, in the bank's latest effort to improve the quality of mortgages it buys from correspondent lenders, according to an internal memo obtained by American Banker.
In a two-page memo sent on Jan. 16, Citigroup executives told correspondent lenders "to withdraw medium/high risk loans," saying the bank could not predict time frames for when the loans would be reviewed "if we are able to review them at all."
"There is still some work outstanding to improve loan manufacturing quality," the memo added. It was signed by John Hummel, a Citibank senior vice president and national sales director; Jon Hicks, also a Citibank senior vice president and national operations director; and Jeffery Polkinghorne, director of origination risk at CitiMortgage.
The changes outlined in the memo are Citigroup's latest attempt to improve the quality of the mortgages it purchases. The bank created a "pre-purchase" review process in 2010 that ranks loans as low, medium or high-risk — but according to the memo, that process has still let some potentially defective loans slip through the cracks.
For example, bank executives have said that loans with so-called
Citigroup spokesman Mark Rodgers said in an email on Wednesday, "We remain extremely focused on the production of high-quality mortgage loans and continually enhance our procedures as part of our total quality management. We regularly assess all of our third party relationships and procedures to ensure high quality loan production."
The changes by Citi come at a particularly tough time for correspondent lenders, which have seen the exit of several large aggregators including
