Citigroup expects to increase its loss mitigation staff by 500 new hires and take a one-time $50 million charge to comply with a federal consent order it signed to settle servicing and foreclosure shortcomings.
The consent agreement with federal banking regulators will increase its servicing costs by about $30 million a year, according to the bank's chief financial offer.
"We don't expect it will have much of an impact on our MSR asset," CFO John Gerspach said during a Monday conference call.
The giant bank services $440 billion of mortgages. The servicing portfolio has a cap rate of 1.15%. (Its total servicing portfolio, including loans serviced for others, is north of $600 billion. The firm ranks fourth nationwide, according to figures compiled by National Mortgage News and the Quarterly Data Report.)
Gerspach told investors and analysts that Citigroup identified improvements that needed to be made in its servicing operations several years ago and began making those changes in the fourth quarter of 2009.
"As we look at the impact of the consent order, we estimated we will have about a $25 million to $30 million annual increase in expenses," he said.