Hibernia has announced it is selling its approximately $10 billion, third-party residential mortgage-servicing portfolio to CitiMortgage.
Financial terms were not disclosed.
Hibernia will continue to originate home loans after the sale. The company for some time had been considering its options related to mortgage-servicing rights.
“Fluctuating interest rates over the past two years have impacted the value of mortgage-servicing rights and resulted in volatility in the mortgage-servicing income stream for Hibernia and many other banks,” said Paul Peters, mortgage-banking president for Hibernia. “Based on our ongoing analysis of the mortgage-servicing asset and our desire to limit earnings volatility in this area, we decided to exit the third-party mortgage-servicing business. We will now direct most of our mortgage-banking efforts toward retail residential origination and release the servicing rights to others in the industry.”
The sale of the portfolio is expected to be completed by Sept. 30, with transfer of mortgage files to occur in the first quarter of 2005. The company will continue to service about $2 billion of Hibernia-owned adjustable-rate mortgages and to own a $650 million portfolio that is serviced by others for Hibernia.
About 80 employees work in Hibernia’s mortgage-servicing operation, and the company anticipates some positions will be eliminated. The company has vacancies elsewhere and said it will work to place as many of the affected employees as possible. Those who are not retained will be given severance packages and outplacement assistance.
Excluding any gain and expenses associated with the transaction, Hibernia does not expect its net income for 2004 to be impacted by the sale. The company continues to expect it will meet the high end of its earnings goal of 8 percent to 10 percent annual growth for 2004.
New Orleans-based Hibernia has $21.3 billion in assets and 310 locations in 34 Louisiana parishes and 34 Texas counties. CitiMortgage is a subsidiary of New York-based financial services giant Citigroup Inc.
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