|Concerns about Citigroup Inc. prompted a servicer rating downgrade at its mortgage unit. Citigroup is expected to become less relevant among U.S. financial institutions.
Moody's Investors Service said today that it downgraded CitiMortgage Inc.'s primary servicer quality rating for prime residential loans to SQ1- from SQ1.
Under Moody's system, the strongest servicers are rated SQ1+ and the weakest are rated SQ5-.
The O'Fallon, Mo.-based company also saw its primary servicer quality rating for subprime mortgages lowered to SQ2- from SQ2, while its primary servicer quality rating for closed-end second liens was cut to SQ2 from SQ2+.
Moody's said the downgrades were the result of a downgrade to the unsecured debt rating of Citigroup and Citibank N.A. on Feb. 27. The actions on the unsecured debt came after an announcement that the New York-based parent would exchange $25 billion in preferred securities held by the U.S. Treasury for common stock.
"Moody's expects that, the current level of government support notwithstanding, Citigroup will emerge from the current economic crisis with a different mix of core business and a smaller scale, which could diminish its relative importance to the U.S. banking system over the long run," today's statement said.
CitiMortgage serviced 4.65 million loans for $737.8 billion as of Feb. 28, according to Moody's. In addition, its master servicing portfolio was 129,352 loans for approximately $32.0 billion.
But in its fourth-quarter earnings report, Citigroup said its residential servicing portfolio was $844.0 billion across its entire consumer banking organization, including a third-party mortgage servicing portfolio of $646.6 billion.