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Citibank Sells OneMain Financial to Springleaf

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Citibank announced today that it is selling OneMain to Springleaf Finanial for $4.25 billion. Citi has been trying to sell OneMain for years. It all began when Vikram Pandit was CEO (after the financial crisis), and he created a bad bank (called Citi Holdings). At the time, no one wanted to buy OneMain because it was a subprime lending company that was capital market funded. In fact, the head of Citi Holdings at the time was Mike Corbat (who is now CEO), and he was ready to accept as little as $1.0 billion for the unit. No one would write a check that big.

A lot has changed in 5 years. In a world of 0% interest rates, investors are hungry for the yield that subprime assets can potentially offer. OneMain, which historically took less risk than other subprime lenders, weathered the storm well and was generating hundreds of millions of earnings. And Springleaf, which rose from the ashes of American General (which was owned by AIG) is looking to continue its growth. As a combined entity, OneMain and Springleaf will be the largest stand-alone subprime lender in the United States, with over $14 billion in assets and more than 2,000 offices.

This is the end of an era for Citigroup, and represents the divestment of the last big part of the old Travlers Group. In fact, Citigroup would never have existed had it not been for OneMain and its roots in Baltimore.

Remember Sandy Weill?

Sandy Weill and Jamie Dimon (now the CEO of JP Morgan Chase) got their start together with a sleepy consumer finance company in Baltimore called Commercial Credit, which would later be renamed CitiFinancial and ultimately OneMain. (The name Commercial Credit is misleading: they did not make any commercial loans). Together, they turned around Commercial Credit and used it as a platform for further acquisitions. They swallowed the larger Primerica Fiancial Services. Then they bought Smith Barney. And then they bought Travelers Insurance, creating TravelersGroup.

Ultimately, in 1998, Citibank and TravelersGroup merged to create Citigroup. The combined business continued to grow and generate incredible earnings. Unfortunately for Citi shareholders, a fight between Sandy Weill and Jamie Dimon led to Jamie’s departure. Sandy then passed over Bob Willumstad for the CEO role and instead appointed Chuck Prince, who spent 4 years dramatically increasing the risk exposure of the bank. He is famous for telling shareholders that “as long as the music is playing, you’ve got to get up and dance.” And dance he did. As late as 2007, he bought a mortgage company (Ameriquest). At the time of the ill-fated acquisition, Citigroup stated that “it’s going to be a nonconforming shop, and we are going to originate along the continuum, from jumbo loans, to Alt-A to subprime.”

As Citi piled on subprime assets at the worst possible time, Jamie Dimon was avoiding subprime mortgages completely at JP Morgan Chase. Citi would ultimately require $45 billion of taxpayer money to stay afloat. Vikram Pandit embarked on a plan to return Citigroup to the old Citicorp, and in the process he would shed most of the TravelersGroup businesses.

Travelers Insurance and Primerica are now both stand-alone, public companies. Smith Barney was sold to Morgan Stanley, and with OneMain’s sale to Springleaf, Citibank today looks a lot like the Citicorp of yesterday.

Big questions remain for Citibank. In the US, they still have a very small retail bank. And they were slow to compete in the credit card space, losing significant market share to Chase. They are now trying to buy market share, as the Costco deal indicates. However, they will likely be paying a significant premium to steal the business. Just as OneMain starts to generate significant earnings, they swap out those assets for lower margin products targeting more affluent customers. It will be interesting to see how Citi grows within its strategy through the recovery.

And, as for OneMain, it is truly the end of an era. The business that was the first chapter in Citigroup and, to a large extent JP Morgan, is now in the hands of Springleaf.

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Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at [email protected]

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Here’s Why Single Women Are Buying More Homes Than Single Men

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Right after she turned 30, public relations pro Wendy Hsiao put in an offer on a cute brick townhouse in Atlanta. “For a lot of my friends, being an adult started either when you got married or had a baby,” she said. “I chose to buy a house.”

Why did she buy? She felt ready for a major life change, considered buying to be a smart financial decision and wanted a yard for her Pomeranian named Georgia. “I felt like it was time to make a place my home,” Hsiao said.

Her story is one example of a growing trend: the rise of single female homeownership. Single women are far more likely to become homeowners than single men, according to a study on singles owning homes by LendingTree, which owns MagnifyMoney. In fact, single women own 22% of homes on average, while single men own less than 13%.

This “gender gap” stems partly from the fact that single women prioritize homeownership when setting life goals. In fact, 73% of single women list owning a home as a top priority compared with 65% of single men, according to the 2018 Homebuyer Insights Report from Bank of America.

Single women are “skipping the spouse and buying the house,” according to the Bank of America report, which found that single women rank homeownership as a goal above getting married (41%) and having children (31%).

From homemaker to homeowner

While there’s still work to be done, women have taken huge steps toward professional and financial independence. Homeownership in particular contributes to economic stability, so it’s great that more single women are buying homes. There’s no doubt the increase in the number of women in the U.S. workforce, a figure that has more than doubled since 1975, has contributed to the trend. Here are some other driving forces behind the rise of single female homeownership:

Homeownership empowers women. Homeownership offers a place to live, stability and a way to build wealth, so it’s no surprise women view owning a home as empowering. In fact, 31% of single women (vs. 23% of single men) feel empowered when thinking about buying their first home. A licensed real estate agent in Chicago, Martina Smith bought a condo in her dream neighborhood of Streeterville after she broke off an engagement a few years ago. Her budget only allowed her to buy a “fixer-upper,” but she got a great deal and renovated her place. “It’s been very rewarding and empowering,” she said. And she thinks it reflects a bigger national trend. “We’re seeing more women taking charge,” Smith said.

Women are becoming more educated. Over the past few decades, women have become more educated than men. In 2017, 38% of women and 33% of men ages 25 to 64 had a bachelor’s degree. In that age group, 14% of women and 12% of men had an advanced degree. And women are putting off marriage to pursue that education, according to the 2018 Women in the Housing & Real Estate Ecosystem report. Educational attainment has a positive impact on homeownership rates.

Women are done waiting to marry. There’s been a cultural shift where women no longer feel they need to wait until they pair up to embark on certain aspects of “adulting,” said Kelley Long, a CPA and certified financial planner with Financial Finesse. “I will never forget a friend’s dad chastising me for doing ‘nesting’ things like buying nice furniture before I was married because of his perception that you just don’t do things like that until you’re married,” Long said, adding that women are “rejecting that idea because it’s not true.” If you want to marry in the future, the right partner will likely be impressed that you were financially secure enough to buy a home on your own, she said.

Single moms want a home base to raise kids. “Oftentimes, when people buy homes it’s for lifestyles reasons,” said Tendayi Kapfidze, chief economist for LendingTree. Getting married is one big reason, but having children is the other, he said. About 21% of U.S. kids live with single moms, a number that has almost doubled since 1968. In contrast, just 4% of kids live with single dads. “Children prompt people to buy homes,” he said. “So that might be one of the factors at play.” And it’s not just kids. As many as eight in 10 caregivers for elderly parents are women. The median age of a single female buyer is mid-50s, points out Jessica Lautz, vice president of demographics and behavioral insights for the National Association of REALTORS. A single female homebuyer “may be coming from a past relationship and purchasing a new home for herself, her children and her parents,” Lautz said, adding that single females are “willing to make sacrifices” to purchase a home.

So what does the future hold for single women owning homes? If marriage rates among all U.S. adults continue to drop, it’s likely the number of single women purchasing homes will rise even more, Lautz said.

Turn your homeownership dreams into reality

Strict lending standards can make it more difficult to qualify for a mortgage on a single income. Considering women also only make 80% of what their male colleagues earn, getting to a financially secure enough position to afford homeownership may feel daunting. Here are three tips for single women looking to buy a home of their own:

  1. Prep your finances for homebuying. It’s important to check your credit and your debt-to-income ratio before you start the homebuying process. If you spot problems, work on increasing your credit score and paying down your debt before you try to get preapproved for a mortgage. Getting the best possible rate can save you money over the life of the loan, which is especially important when your household depends on a single income. The upside is that single women have complete control and don’t need to worry about anyone else’s shaky credit or loads of debt. “If you’re in a couple, somebody is going to be dragging the other person down,” Kapfidze said.
  2. Build your nest egg before you buy. Forty-eight percent of women say they haven’t purchased a home yet because they haven’t saved enough for a down payment. But that’s not the only savings barrier to breach before taking the leap into homeownership. “Make sure you have a robust emergency fund,” Kapfidze said. Because single homeowners are on their own, they should set aside at least three months of mortgage payments as part of their emergency fund, Kapfidze suggested. “If you’re single, you’re the only one with income coming in to pay the mortgage,” he said.
  3. Pick a home that comes in under budget. Single women have lower household incomes than single men, so they may need to consider buying a smaller home, taking on a house that needs some work or settling in a lower priced neighborhood. The good news is that single women may be doing exactly that. In fact, the average home purchased by a single woman cost $173,000 compared with over $190,000 for a single man. Single women “may need to make price concessions when purchasing to find a home for themselves and their families,” Lautz said. And buying less house than you can afford can help you make your mortgage payment more easily if you hit financial hard times in the future.

Finally, it’s normal to feel stressed when you think of buying a home. In fact, more women (40%) than men (30%) feel overwhelmed by the idea of homeownership. But even though the homebuying process was scary, Hsiao said she has zero regret about buying a home of her own: “If you love the house, it’s 100% worth it.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Allie Johnson
Allie Johnson |

Allie Johnson is a writer at MagnifyMoney. You can email Allie here

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