Citi Suspends Mortgage Apps Over Missing Documents; Questions Raised
Thursday, June 25, 2009 10:40
Citigroup has suspended mortgage applications at a unit which produced nearly $58 billion (half of the their mortgage business) after the bank discovered that income verifications and property appraisals were ‘missing.’ Other missing information includes employment verifications, phone numbers, credit reports and rent verification.
In a letter to clients, Citigroup stated that the division has stopped accepting new loans on June 23rd and will resume operations on July 6th. The bank has not disclosed how many documents went missing.
“The suspension of correspondent lending is a bold step that may frustrate Citigroup’s mortgage-banking partners and put them on notice that the company will no longer tolerate incomplete loan submissions“, a mortgage consultant tells Bloomberg. He goes on to say that ““This is a positive sign of Citi’s commitment to correspondent channel…They want to improve their process, so they can remain an active player.”
Noticeably absent from the Bloomberg article, however, are critical questions- How can these documents be missing in the first place? Are we to assume that missing credit reports, appraisals, and rent verifications may have overstated the value of tens (or even hundreds) of billions of dollars in mortgage loans? Who owns these mortgages? If they remain on Citi’s balance sheet, can we trust their figures? If they are owned by investors, what were they rated? Have the rating agencies placed the securities on downgrade watch?
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