Citicorp Revamping Mortgage Operations

Citicorp has quietly begun a sweeping reorganization of its home-mortgage operations, leaving in limbo the executive who led the company's rise to the top of the market in the 1980s.

Under the plan, billed as an efficiency move, Citicorp Mortgage Inc. of St. Louis will be dismantled and its pieces melded with the rest of the parent company's consumer banking structure. Robert D. Horner, chairman of the unit, will surrender his role as Citicorp's mortgage leader.

New Emphasis on Branches

The reorganization, announced internally this week, could well see Citicorp pull back from MortgagePower, its controversial system for attracting customers through realty brokers and mortgage brokers. The Citicorp of the 1990s apparently will place a greater emphasis on snaring borrowers at its bank and thrift branches.

The changes come as Citicorp is experiencing abnormally high mortgage delinquencies. But the company insists that the reorganization is unrelated to the loan-quality problems. Instead, Citicorp said, it is part of a corporate effort to become leaner and meaner.

In the reorganization, David A. Brooks, head of Citicorp's western consumer banking region, will take on the additional role of the company's mortgage "champion" and coordinator. Those functions had been performed by Mr. Horner.

"Bob will be working with [Mr. Brooks] through the transition, and then Bob will be looking for other opportunities within the bank," said Citicorp spokeswoman Susan Weeks.

Horner Assisted with Plan

She added that much of the reorganization "reflects Bob's own thinking." Ms. Weeks said Mr. Horner devised the plan with Pei-yuan Chia, who became Citicorp's head of consumer banking last December.

Mr. Horner, who could not be reached for comment, joined Citicorp in 1986 from the mortgage unit of Sears, Roebuck and Co. and then led Citicorp on a breathtaking, nationwide expansion. In doing so, he relied chiefly on MortgagePower, an approach devised in the early 1980s for Citicorp's home market of New York.

The strategy, which allows brokers to earn extra fees for helping clients get Citicorp mortgages, has accounted for about 70% of the originations by all Citicorp units. Those originations totaled about $12 billion last year. But some rivals have branded MortgagePower as a thinly disguised kickback scheme.

Question of Loan Quality

Indeed, some sources say Citicorp already is pulling back from MortgagePower -- not because of the "kickback" criticisms, but because of poor loan quality. With brokers helping homebuyers start their loan applications, Citicorp may not understand the loans as well as if loan officers had started the process, experts say.

Certainly, Citicorp has written plenty of bad mortgages. At the end of the first quarter, 5.12% of its home loans were past due by at least 90 days or on nonaccrual status, far above the 1.61% average for all banks and thrifts, according to SMR Research, Budd Lake, N.J.

But Citicorp has put the blame for the problems chiefly on the weak economy of the Northeast, where much of the company's lending has been centered.

Ms. Weeks said the company remains committed to MortgagePower, though she acknowledged "a renewed emphasis" on branch originations.

Citicorp Mortgage deals with brokers through offices in 21 states and services nearly $70 billion of mortgages for various Citicorp units and other investors. Considered the hub of Citicorp's mortgage effort, it has coordinated the lending by thrift and bank units.

Reporting Is Switched

Under the reorganization, Citicorp Mortgage's offices will report to the parent company's three regional divisions for consumer banking.

"What we are trying to say is that the mortgage is integral to the full financial relationship and therefore should be managed by those people who are building that relationship -- and that means the consumer banks," Ms. Weeks said.

Number of Layoffs Hazy

The mortgage unit's servicing division will report to the head of operations for consumer banking, Richard G. McCrossen in Maryland. The actual servicing work is expected to remain in St. Louis, but the decision has yet to be made.

Likewise, it remains unclear how many jobs will be eliminated, which has raised the anxiety level at Citicorp Mortgage. The unit employs some 2,900 people.

Citicorp is not the first big lender to meld its mortgage unit into its normal consumer operations. Some of the large California thrifts carried out similar moves in recent years. Citicorp, however, "is doing it on an unprecedented scale," said Stuart Feldstein, president of SMR.

While Citicorp says it fully intends to remain a leading player in the market, that may well depend on just how well the changes are executed.

PHOTO : Robert D. Horner Helped to scrap his own job

PHOTO : David A. Brooks New mortgage leader

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.