Will Citi Strike Again?

When John Reed ran Citicorp, the company did its best to avoid growing its residential mortgage business. But that was then, before the banking colossus merged with Travelers and Sandy Weill took control.

Under the chairmanship of Mr. Weill, Citigroup has exerted its presence in residential finance like never before, acquiring not only several "A" paper firms, but one of the nation's larger subprime players, Associates First Capital Corp.

In mid-May, when Citigroup announced that it was buying Principal Residential Mortgage, Des Moines, the nation's 11th largest servicer, for $1.26 billion, few in the industry were surprised. (The sale had been rumored for weeks.)

Once completed, the PRM acquisition will make CitiMortgage, O'Fallon, Mo., the nation's fifth largest servicer with $340 billion.

Now the question becomes who will Citigroup buy next. The company has been mentioned as a possible buyer of Cendant Mortgage, Mount Laurel, N.J., a $138 billion servicer that currently ranks 10th.

If Citigroup winds up with Cendant, it would pass Chase Home Finance as the nation's No. 4-ranked servicer, putting itself in a position to challenge the "big three" of housing receivables: Washington Mutual, Wells Fargo Home Mortgage and Countrywide.

For now, Citigroup and CitiMortgage officials are saying little about its immediate plans, but as investment banker Brenda White of B.B. White & Co., put it: "I think this deal makes it clear that Citi believes mortgages are a central piece to the customer relationship."