Citigroup Inc. said Thursday that it would buy Source One Mortgage from Fund American Enterprise Holdings Inc. in a deal that would nearly double Citigroup's home loan volume.
The deal would make Citigroup the ninth-largest mortgage originator in the country. Citi and Source One together originated $27 billion of home loans in 1998. The deal would also make Citi the 11th-largest servicer, with a $70 billion portfolio. Terms of the deal were not disclosed. Fund American said that Source One had a book value of $368 million on Dec. 31, and that it anticipated a $15 million after-tax gain from the sale.
Source One of Farmington Hills, Mich., and its subsidiary Central Pacific Mortgage lend mostly to low- to mid-income households through the government-guaranteed VA and FHA programs. Citigroup views these households as an "important customer segment," said Carl Levinson, the company's executive director of consumer assets.
The deal nets Citigroup another 160 sales offices, 300 mortgage brokers, and 200 correspondents.
The move is a departure from the internal growth strategy Citibank has pursued in recent years, and may signal the bank's interest in becoming a major player in the industry, observers said.