Citigroup, a $60 billion nationwide originator of home mortgages, has announced that it has severed relationships with 3,900 mortgage brokers and correspondents in an effort to clean up its subprime lending image problems. With the acquisition of Associates First Capital last year for $31.1 billion, they became one of the largest subprime lenders in the country.
The 3,900 third-party mortgage brokers, who represent 64% of the brokers that The Associates used to do business with, will no longer be on Citigroup's list. The policy changes are in keeping with Citigroup's practice of keeping subprime lending in-house and not relying on mortgage brokers.
The business arrangements with the mortgage brokers were terminated for a variety of reasons including "inadequate or suspended state licenses; failure to bring in regular, quality business; integrity concerns; or failing to acknowledge CitiFinancial's [Citigroup's finance company unit] code of conduct." Some of the brokers on the list had gone out of business so they were eliminated.
Subprime lending targets consumers who have tarnished credit history records. Borrowers typically pay higher fees and other costs but the loans are not necessarily predatory. Subprime lending crosses the line into 'predatory lending' when the fees, costs and other loan elements are abusive.
Citigroup has been criticized by consumer groups for their purchase of The Associates, which has long been considered to be one of the nation's worst predatory lenders by community organizations. The Wall Street Journal reported that CitiGroup said it plans to monitor the performance of the remaining correspondents and brokers.
Pat Rioux
