Citigroup is selling mortgage-servicing rights on $63 billion of loans, its largest potential sale of this type since the 2008 financial crisis, according to two people briefed on the offer.
The servicing rights, or MSRs, represent about 21 percent of Citigroup's total contracts as of midyear, and could be sold in pieces, said the people, who asked not to be identified because the sale is private.
Citigroup's offering comes as the nation's banks, including Bank of America Corp. and Ally Financial Inc., retreat from the almost $10 trillion mortgage-servicing market amid looming Basel III regulations. That's attracting private-equity firms and hedge funds including Fortress Investment Group LLC and GSO Capital Partners LP to assets that can increase in value when borrowing costs rise and giving them more control over the rights to collect Americans' monthly mortgage payments.
"It's a step toward cleaning up their capital," said David Stephens, the chief financial officer at Denver-based United Capital Markets Inc., who added he didn't have specific knowledge of the Citigroup offering. Demand is currently high enough that banks can sell the rights without recording a loss, he said.
Shannon Bell, a spokeswoman at Citigroup, declined to comment on the potential sale.
Citigroup owned the servicing rights on $301 billion of mortgage balances at the end of June, according to the lender's quarterly securities filing. The bank valued those contracts at $2.52 billion at midyear.
MSRs are trading for between four and five times the 25 basis point servicing fee, according to Stephens. If Citigroup gets a similar price, it may collect between $630 million to $788 million in the sale, he said.