ABN Amro Mortgage - Under New Ownership

ABN Amro Mortgage, one of the largest mortgage loan originators and servicers in the United States, was the mortgage lending arm of the international Dutch Bank ABN Amro. ABN Amro Mortgage was purchased by Citigroup in early 2007. Citi Mortgage now hosts a website dedicated to the 1.5 million existing ABN Amro customers it inherited, as well as prospective new mortgage customers at: http://www.mortgage.com/

At the time of the sale to Citigroup, ABN Amro Mortgage was headquartered in Ann Arbor, Michigan and was a unit of ABN Amro’s regional LaSalle Bank.

The mortgage-servicing portfolio was valued at $224 billion when it was purchased, although the purchase price was not disclosed. An additional $9 billion in other ABN Amro assets was included with the sale.

AMN Amro was the result of a merger of two Dutch banks in 1990: ABN, and Amro. The history of the two banks dated all the way back to 1924. From 1991 through 2007, the merged bank, ABN Amro became one of the largest banks in Europe. Then in October of 2007, the Royal Bank of Scotland, Fortis, and Banco Santander together made an offer on the Dutch Bank, and by November 2007 the three European banks had acquired 97% of ABN Amro’s stock, making the purchase the largest bank takeover in history.

LaSalle Bank, which was once the wholesale lending arm of ABN Amro and for a time included the US ABN Amro Mortgage division, was sold to Bank of America in October of 2007. Today, Bank of America own LaSalle Bank, and Citigroup owns what used to be ABN Amro Mortgage.

If that sounds confusing it might be because toward the end of its life, ABN Amro was a huge financial institution with a complex organization. The current CEO of ABN Amro is Royal Bank of Scotland’s Mark Fisher. ABN Amro, the European bank, is being reworked and reorganized to steam line and refocus operations.

At the same time, Citigroup is now busy divesting itself of its mortgage holdings as quickly as it can, and drastically reducing the number of new mortgage loans it makes. Not long after purchasing ABN Amro Mortgage, Citigroup experienced huge losses as a result of the US subprime mortgage crisis, and had to seek a cash infusion to stay afloat, which it did finally get from the Arab nation of Abu Dhabi.

Citigroup replaced its CEO shortly after posting the heavy subprime losses with Vikram Pandit, who immediately combined the new acquired ABN Amro mortgage portfolio, the subprime lending arm of Citigroup called Citi Financial, and Citi Mortgage, all under the umbrella of Citi Mortgage.

Citi Mortgage eliminated 2,000 jobs in March of 2008, and intends to reduce its entire mortgage portfolio by 20% or $42 billion by the beginning of the third quarter.

Changes in the banking industry, and especially in the mortgage industry, have been coming fast and furious over the past several years, and will likely continue as financial markets attempt to stabilize and recover from the subprime fiasco.

European bankers had been speculating about a merger or acquisition for several years before the takeover of ABN Amro by RBS, Fortis, and Banco Santander. Ironically, Citigroup has been the topic of similar gossip for a number of years in the US. Some analysts feel Citigroup has grown much too large and too complex to be effectively managed as a single financial entity.

Wall Street will be watching Citigroup CEO Vikram Pandit closely to see if Pandit, formerly the President of Investment Banking and Institutional Securities at Morgan Stanley, will be able to streamline Citigroup and refocus it so as to make it a profitable, manageable financial entity.