Nearly two-thirds of the mortgage brokers and more than half of the correspondent lenders that Associates First Capital worked with before it was bought by Citigroup Inc. have been cut off from doing business with Citi’s subprime lending unit.

An internal Citigroup report made available to the press detailed Citi’s progress toward making the business practices of its subprime unit more consumer-friendly.

According to the report, CitiFinancial, the company’s subprime unit, has so far suspended more than 3,600 mortgage brokers for failing to produce a license, not sending CitiFinancial loans over the previous 12 months, or failing to sign a broker compliance agreement the subprime unit sent out to them. The suspensions represented 63.7% of all brokers Associates had dealt with. Of those, 1,100 suspensions had been announced in April, when Citi concluded the first phase of the review.

The company also announced it had suspended 1,200 pending foreclosures following a review.

In a process that roughly paralleled its review of brokers, by June 30 Citi had suspended relationships with 300 correspondent lenders, 53% of the correspondents that had been on Associates’ approved list. About half the cuts were due to failures to sign compliance statements and about a quarter of the companies were already out of business.

Since Citi over the past six months has started relationships with 50 new correspondents and reactivated them with 10 other correspondents, its list of correspondents dropped 40% for the year.

The developments are part of a series of steps by Citi to shape up the public image of its subprime lending unit. Citigroup announced the initiatives in November amid a cloud of activist criticism surrounding its September merger with Associates First Capital, a subprime lender formerly of Dallas. The additional suspensions and foreclosure actions announced in the report Thursday focus on relationships with third parties, while most of the criticism has been aimed at branches run directly by CitiFinancial or Associates.

Wright Andrews, the chief lobbyist for the National Home Equity Mortgage Association said, “This announcement certainly shows that Citigroup is making a monumental effort to improve the practices of Associates and to integrate it into Citi’s operations. Time will tell what additional steps may have to be taken, but they’ve certainly done an awful lot.”

In late June, Citi stopped selling single-premium credit insurance on its real-estate secured loans in favor of an alternative monthly product, citing the perception that the product was predatory.

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