Citigroup halts some mortgage buying; data missing

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By Jonathan Stempel

NEW YORK, June 24 (Reuters) - Citigroup Inc (C.N: Quote, Profile, Research) said a big mortgage unit has temporarily stopped buying new loans after concluding that some property appraisals and documents showing borrowers' incomes were missing.

The halt comes as mortgage companies tighten their standards after years of lax underwriting let many borrowers obtain loans they could not afford or which were too large given the underlying property values.

In a June 22 letter to clients, Citigroup said it would stop accepting correspondent loans, which are made through banks and independent providers, at 6 p.m. on June 23, and would resume acceptance on July 6. "There remain key areas that sometimes fall short of our quality-control process," according to the letter, signed by CitiMortgage Managing Director Brad Brunts and Senior Vice Presidents Jeffrey Walker and Cindy Manser. "It is vital to our business and our relationship that we collectively work to dramatically improve quality."

In the correspondent business, CitiMortgage would typically buy mortgages originated by other lenders. It sometimes retains the servicing rights on mortgages it subsequently sells.

As of Dec. 31, the bank had $73 billion of mortgages made in the correspondent channel on its books, or 38 percent of a total $193 billion of mortgages, its annual report shows.

A copy of the June 22 letter was obtained by Reuters. Its contents were confirmed by Citigroup spokesman Mark Rodgers. He said the bank reviews quality control in the correspondent business "on an ongoing basis, and we have identified areas of improvement."