It looks like Citi is following Chase's lead and is shutting down their wholesale lending (broker) and much of their correspondent (banker) divisions effective immediately (not verified by Citi). Chase kept open correspondent by the way. For those of you that did not catch my Chase report and take on where the mortgage industry is headed over the near-term, please see…
- The End of Large-Bank Wholesale Lending - Time For the Mortgage Banker (144)
Posted on January 16, 2009 2:23 PM
This announcement could also be a sign of something bigger coming than Citi simply exiting the highly unstable wholesale space. Chatter has it that the Obama administration will announce something big this weekend. Some think this 'something' is the nationalization of some of the nation's most troubled financial institutions vs. letting them suck every penny thrown their way into their black liquidity trap holes. Some are saying that Obama will increase the size of the stimulus plan in addition to announcing TARP 2.
There is even speculation that the National 'Bad Bank' of the USA will be brought to life to buy up distressed assets from the balance sheets of the nation's most important banks. However, the latter would likely require much deeper pockets than most think…and I only track the residential side! Additionally, a bad bank buying distressed assets at 'fair value' as Sheila Bair said this week could do serious damage to the very distressed asset prices that they are buying and hit hard already battered balance sheets.
Stay tuned. More banks will be shutting down wholesale lending over the near-term which will put a strain on the mortgage market. There is just not the excess capacity through retail or correspondent channels to absorb everyone 'trying' to refinance now. There isn't the warehouse capacity on the mortgage banker side to make a dent either.
rest http://mrmortgage.ml-implode.com/2009/01/22/citi-follows-chase-out-of-wholesale/
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