Citigroup Selling Servicing Rights as Banks Retreat

The U.S. mortgage market’s largest lenders like Citigroup are pulling back amid looming regulations and a drop in refinancing that fueled record profits last year.

Bloomberg via National Mortgage News

Citigroup Inc., the third-biggest U.S. bank, is selling mortgage-servicing rights on $63 billion of loans, or about 21 percent of its total contracts at midyear, according to two people briefed on the matter, who asked not to be identified because the sale is private. Wells Fargo & Co., the largest home lender, began marketing rights on $41 billion of government-backed home loans in September.

Banks are scaling back from the almost $10 trillion market for mortgage servicing rights, or MSRs, amid looming Basel III regulations. That’s attracting private-equity firms and hedge funds to assets that can increase in value when borrowing costs rise and giving them increased control over the rights to collect Americans’ monthly mortgage payments. Lenders such as Bank of America Corp. are also cutting home-loan staff after refinancings dropped more than 60% since May, according to the Mortgage Bankers Association.

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