U.S. News

Ross Unit to Service 185,000 Citi Mortgages


Financier Wilbur Ross's American Home Mortgage Servicing, is buying servicing-rights on 185,000 loans belonging to Citi Residential Lending, a unit of Citigroup , for $1.5 billion.

"American Home Mortgage...is already the second-largest mortgage servicer for third parties in the country, and this adds to our scale," Ross told CNBC in an exclusive interview.  "There's tremendous operating leverage as you put more activity through the same systems."

Wilbur Ross & Citi Subprime

He said the huge number of defaults now occurring has made it much more difficult to service the loans.  His mortgage interests modified nearly 15 percent of their loans last year, cutting the payments to make them easier for cash-strapped customers to meet.

Ross founded American Home Mortgage Servicing in April 2008.  The company is doing a lot of its work through a location in Pune, India, acquired as part of a transaction with H&R Block.

"It's a lot more efficient to have call-center type operations and some of the back-office functions there, rather than in the United States," he said. 

Ross said he hopes for substantial help in mortgage mitigation from the federal government.

"I really feel that we're not going to get out of this terrible economic environment until housing prices are stabilized," he said.  "This whole credit crunch really started with the housing problem, and I think until we end the housing problem, we're not going to end the credit crunch, either."

He explained why improving the condition of residential real estate is crucial to economic recovery.

"American families--12 million of them--are underwater on the mortgages on their homes," he said.  "The total amount of money that's been lost by families out of their net worth due to home depreciation is probably $5 trillion.  To me, (those figures) help explain why consumers aren't buying cars, why they aren't buying new clothes, why they aren't taking big trips, why they aren't eating out."