How Citigroup stumbled in the Mexican housing market

ZUMPANGO, Mexico/NEW YORK - (Reuters) - Just outside the town of Zumpango, about an hour from Mexico City, packs of stray dogs sniff around abandoned homes in a half-empty neighborhood. The Santa Fe housing development, where power outages and flooding are the norm, is a casualty of Mexico's dysfunctional housing market. The neighborhood has created heartache for its residents, but it is also disappointing for Citigroup Inc, which helped finance Desarrolladora Homex, the site's developer and once Mexico's second-largest homebuilder. Last year, the U.S. bank posted weaker-than-expected third-quarter earnings after effectively writing down more than a quarter of the value of loans made to Homex and two other struggling Mexican homebuilders, Corporación GEO and Urbi Desarrollos Urbanos.

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