Stung by mortgages, Citi pushes home equity loans

With all the turmoil at Citigroup Inc., much of it linked to mortgage-related write-downs, the nation’s largest bank is pitching home equity loans via e-mails, observes Grumpy Editor.

Its CEO, Charles Prince, resigned Sunday as Citigroup said it will write off $8 billion to $11 billion to reflect declining value of subprime mortgage-related securities since Sept. 30.  This is in addition to $2.2 billion in trading losses and mortgage-related write-downs announced three weeks ago.

Now four months into a credit crunch resulting in tighter lending standards at most financial institutions, one would think any promotion related to home loans at this time would be subdued --- or temporarily shelved.

But the current Citi home equity pitch via e-mail headlines “Lower your monthly payments” and “Use equity to invest in your home.”   The message suggests funds from a home equity loan can be used to consolidate debt and for home improvements.

The e-mail mentions a 6.99 percent variable APR (while Citi’s Web site indicates current variable rate lines, a bit lower, starting at 6.74 percent).

Also mentioned in the e-mail:  “Enjoy a low fixed rate loan.”  (Deep in the 17 lines of small print at its Web site, Citi notes a fixed rate’s APR may be as low as 7.24 percent and as high as 12.24 percent.)

As The Wall Street Journal noted in a front page article yesterday, a decade after prior CEO Sanford Weil “built the insurance-to-banking-to stockbroking behemoth through a run of acquisitions, his creation remains an often dysfunctional collection of businesses whose employees sometimes ignore or even compete against each other.”