Citigroup Seeks Mortgage Growth

(Citigroup statement on plans to grow its correspondent lending business included in this update.)

NEW YORK (TheStreet) -- Citigroup (C) is expanding its correspondent lending business, as the bank appears to be re-embracing home lending as the U.S. economy's recovery inches forward.

Bloomberg on Friday reported that Citigroup was reversing its original plans to scale back the home lending business, by increasing its purchase of home mortgages and by keeping more loans on its balance sheet.

Citigroup, in a statement emailed to TheStreet late Friday, said the move is not a shift in strategy. The company is "committed to growing our mortgage business with a focus on quality and long-term sustainability," a spokeswoman said.

Citigroup has "reengineered quality controls to be best in class and are looking to grow the correspondent channel, in a controlled, deliberate manner, with high-quality lenders who provide superior quality loans," the statement said. "This expansion is an important step to ensuring the foundation for future success is in place."

Citigroup had decided in January 2009 that mortgages were not a core part of its business and had placed its CitiMortgage subsidiary within its bad bank entity, Citi Holdings, to be sold or put in wind-down mode. However, Citigroup was still originating mortgages through its retail banking franchise.

Sanjiv Das, head of Citigroup's U.S. mortgage business told Bloomberg in an interview that mortgages are a "core" part of the business alongside other consumer banking products and will continue to offer the mortgages in Citicorp, the good bank entity.

"In order to be full-service consumer bank we had to be able to offer mortgages to our customers," Das said to Bloomberg. "Then, we said let's now start to rebuild this business."

Citigroup's mortgage business, along with credit cards and devalued securities, are what fueled the institution's troubles, leading it ultimately to vaccept $45 billion in bailout funds from the U.S. government in late 2008. In December, Citigroup repurchased $20 billion worth of trust-preferred securities and canceled a loss-sharing agreement with the government. However, through a preferred-to-common stock exchange last summer, Treasury still owns about one-third of Citigroup's common stock. Wall Street is eagerly awaiting the day Treasury begins selling its stake, which could begin as soon as next month, some media outlets are saying.