Citigroup Selling $97 Billion Mortgage Servicing Portfolio

New Residential Investment Corp announced today that it has entered into an agreement to purchase nearly $97 billion in unpaid principal balance (UPB) of mortgage servicing rights from CitiMortgage Inc. The agreement represents an acceleration of Citigroup’s initiative to move out of mortgage servicing. However Citigroup will continue to originate loans for current and new clients.

The New Residential and CitiMortgage agreement was accompanied by a Nationstar Mortgage Holdings subservicing agreement with New Residential for the mortgage loans in question. A release by New Residential states that: “Citi will continue to subservice the portfolio on behalf of NRM, pending receipt of GSE and regulatory approvals to transfer servicing to Nationstar Mortgage LLC.”

Nationstar released a statement in anticipation of the subservicing agreement. "This announcement further demonstrates Nationstar’s role as a leading subservicing provider to the residential mortgage servicing market,” stated Nationstar CEO Jay Bray. “We look forward to welcoming over 750,000 customers to Nationstar, and believe our strategic relationship with New Residential will create meaningful value for these customers and our shareholders.”

Citi has long been a top mortgage player, but its participation and revenue from its servicing business have wavered over time. The company has been scaling back its servicing for years in line with its efforts to operate more efficiently and focus on more profitable business lines.

For all of Citi’s remaining mortgage servicing rights, meaning the MSRs for the mortgages originated and owned by Citi for Citi’s retail bank clients, the servicing will now go to Cenlar.

According to Citi, the subservicing agreement with Cenlar covers the remaining Citi-owned loans and “certain other mortgage servicing rights” that are not being sold to New Residential.

Citi said that the servicing on these loans is expected to be transferred to Cenlar beginning in 2018.

As part of its assumption of the servicing obligations, Cenlar will provide core operations, customer service and default operations, Citi said in its announcement.

Going forward, the servicing for Citi’s retail banking clients will be retained by Citi but will be included in the subservicing contract with Cenlar, meaning that all loans for Citi retail bank clients will be subserviced by Cenlar.

According to a spokesperson for Citi, existing and new loans for Citi retail clients will begin transferring to Cenlar beginning in 2018. In the interim, various stages of the transaction will take place over the next two years.

“The actions will be conducted in waves to help ensure a smooth transition,” the Citi spokesperson said.