Citigroup (NYSE:C) has reversed direction on its mortgage strategy, saying now they'll be increasing the acquisition of mortgages underwritten by other companies. They also said they'll keep more loans on their balance sheet than they said they were going to.

Citigroup CEO Vikram Pandit had transferred the CitiMortgage unit into the new Citi Holdings unit in January 2009, meaning it was destined to be eliminated, restructured or sold.

It is somewhat surprising in that mortgages and mortgage-backed bonds had brought Citigroup to the brink of collapse, with net losses in 2008 alone of $27.7 billion.

with Pandit recently saying he was seeking ways to grow the businesses he was planning on keeping under the Citigroup wing, it seems to imply he's found something in the CitiMortgage unit he thinks will do that, or otherwise why would he decide to change direction.

One plan in place to generate more business is in the "jumbo" loans, which are higher-end loans defined by being over $417,000 in the majority of regions, whereby the company was cutting rates by a percentage point to 4.875 percent.

Citigroup said they will keep these jumbo loans which were recently underwritten on their books.

Another strategy is to increase the number of smaller banks and financial institutions Citimortgage will buy loans from, bringing the total to somewhere close to 300 companies which they are willing to purchase loans from. 

As of December 31, home loans in the North American market on the Citigroup balance sheet were down 12 percent from a year earlier, with $172.4 billion on the books.