Abayomi Azikiwe, editor of the Pan-African News Wire, covering a demonstration organized by the Moratorium NOW! Coalition on May 29, 2009 in downtown Detroit. (Photo: Alan Pollock)
Originally uploaded by Pan-African News Wire File Photos
By Francesco Guerrera and Justin Baer in New York
October 18 2010 18:27
Citigroup sought to allay investors’ fears over the US mortgage crisis, saying it had not uncovered any irregularities in its foreclosure process and downplaying the potential cost of buying back home loans from government entities.
Citi’s comments – and its better than expected third-quarter results – on Monday sparked a rally in its shares and lifted some of the gloom that engulfed the banking sector last week amid market fears the foreclosure morass could hit lenders’ earnings.
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Shares in Citi, in which the US government holds a 12 per cent stake, were up more than 3 per cent at midday in New York.
Bank of America and JPMorgan Chase also regained some of the ground lost last week but the rise in BofA’s stock was more muted as investors awaited Tuesday’s third-quarter results.
BofA, JPMorgan and GMAC have suspended foreclosures after learning that “robo-signers” had rubber-stamped thousands of mortgage documents without checking their accuracy. Other large mortgage servicers such as Citi and Wells Fargo did not follow suit, arguing that they did not have the same problems as their rivals.
“We have not found evidence of robo-signing as we have gone through our review,” John Gerspach, Citi’s finance chief, said. “We are fairly confident we have not relied on robo-signers.”
In an effort to ease investors’ worries on other mortgage- related issues, Citi disclosed for the first time the cost of buying back home loans from Fannie Mae and Freddie Mac.
The government-owned financiers have been demanding banks repurchase mortgages that failed to meet certain underwriting guidelines. Citi said it had suffered a $100m loss on its repurchases in the third quarter. Since 2008, Citi has repurchased $5.8bn of mortgages out of $16.4bn in claims by Fannie and Freddie.
In the three months through September, Citi recorded net income of $2.2bn – its third consecutive quarter in the black. Earnings per share were $0.07, ahead of analysts’ forecasts.
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