Citigroup (NYSE: C) is going to make share cuts in it mortgage loan business. That may make the market for getting home loans harder as one of the major sources for buyers moves away from lending.
According to The Wall Street Journal, "The bank said it plans to reduce its $200 billion portfolio of mortgage loans by about 20% over the next year and afterward will focus its underwriting on loans that can be sold on to other investors." Closing lending offices will also save the company money.
As Citibank and other banks cut their lending into the home-buying markets, the standards for getting mortgages will certainly go up. So could interest rates as banks ask of higher payments to offset potential risk.
By putting in their home-lending horns, banks may make a recession much deeper. The housing market cannot recover without buyers. Banks are making it harder for buyers to finance purchases.
While the Fed is providing more capital to banks at lower rates. those benefits are not being passed on to the consumer. Treasure and the Fed are going to have to come up with a program that actually encourages banks to take the "cheap" money they are getting and lend it into the markets.
Otherwise, the housing mess could get much worse.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
3-08-2008 @ 10:48PM
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