Let's say you decide to try to jump the Grand Canyon on a dirt bike. You fail miserably, sustain significant injuries, and nearly die. Do you get back on your motorcycle after you recover and try again? Apparently, Citigroup would. After being one of many banks that foolishly originated terrible mortgaged doomed to fail, which helped to trigger a nasty financial crisis and nearly caused the firm to fail, it's back at the game. Has the bank learned nothing?
Three years after bad home loans helped trigger the recession and six weeks after the government cashed in the last of its $45 billion Citigroup investment, the New York-based bank is still selling mortgages that violate quality standards, according to an internal Freddie Mac review obtained by Bloomberg.
Fifteen percent of the performing loans Citigroup sold to the government-owned mortgage-finance company in the second half of 2009 and the first half of 2010 had such flaws as missing appraisals or insurance documents or income miscalculations, according to the review of 375 mortgages. The target for defects should be about 5 percent, said Tim Rood, a former executive with Freddie's sister agency, Fannie Mae, and now managing director at Washington-based advisory firm Collingwood Group LLC.
This is pretty mind-boggling. After nearly failing due to its exposure to bad mortgages, Citi is still originating lots more mortgages without proper documentation.