Citigroup will stop offering mortgages through brokers, it was announced yesterday.
In doing so, the bank joins the ranks of JP Morgan Chase and Bank of America, who have already ended their relationships with brokers.
Since collapse of the mortgage security market resulted in the 2008 financial crisis, many banks have curbed their home loan programs and stopped relying on brokers—who bore a majority of the blame for issuing the many of those subprime mortgages, Dow Jones reported.
The government has been pushing that narrative. Since his appointment, Consumer Financial Protection Bureau chief Richard Cordray has repeatedly said that much of the causes of the financial crises can be traced back to “non-bank financial institutions.”
Last year, 8.6% of the $67.9 billion of mortgages Citi originated came from brokers, according to Bloomberg.
Dan Freed at TheStreet.com points that this could be a plus for the housing market because of it means higher quality home loans, which could guarantee higher return for banks. On the other hand, cutting off the brokers network also means less available credit for some hoping to buy homes.
Citigroup plans on continuing to issue mortgages through its retail bank branches and partner banks. The cut off from mortgage brokers will be in effect Feb. 8, according to Dow Jones. As a result of nixing the broker connection, 300 Citi employees may be reassigned and job cuts will be in the “low double digits,” Bloomberg reported.