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Citigroup will Pay $7 Billion Nationwide in Settlement Regarding Mortgage-backed Securities

fontanaheraldnews.com | July 14, 2014

California Attorney General Kamala D. Harris, along with the U.S. Department of Justice and state partners, announced a settlement with Citigroup Inc. to resolve federal and state civil claims related to Citigroup’s conduct in the packaging, securitization, marketing, sale, and issuance of residential mortgage-backed securities prior to Jan. 1, 2009.

Nationally, the settlement totals $7 billion. California will recover $102,700,000 in damages, which will reimburse the state’s pension funds, CalPERS and CalSTRS, for losses on investments in mortgage-backed securities of Citigroup and its affiliates.

California is also guaranteed at least $90 million in consumer relief.

“Citigroup misled consumers and profited by providing California’s pension funds with incomplete information about mortgage investments,” Harris said on July 14. “This settlement holds Citi accountable and compensates the state’s pension funds that protect the retirement savings of hardworking Californians.”

As part of the settlement, Citigroup acknowledged it made serious misrepresentations to the public, including investors, about the mortgage loans it securitized in residential mortgage-backed securities, Harris said.

The resolution also requires Citigroup to provide relief to underwater homeowners, distressed borrowers, and affected communities through a variety of means, including financing affordable rental housing developments for low-income families in high-cost areas. The settlement does not absolve Citigroup or its employees from facing any possible criminal charges.

The Inland Empire, including Fontana, was hit very hard by the mortgage crisis.

An investigation conducted by Harris showed that offering documents for the securities failed to accurately disclose the true characteristics of many of the underlying mortgages, and that due diligence to weed out poor quality loans had not been adequately performed.

As part of the settlement, Citigroup will provide $2.5 billion in relief to aid consumers across the country, including Californians, in the form of principal forgiveness, loan modifications, donations to housing and legal assistance nonprofits and efforts to reduce blight. A total of $4.5 billion will be paid to settle federal and state civil claims.

The settlement related to California’s pension funds arises from the investigation into mortgage-backed securities by Harris's Mortgage Fraud Strike Force, which was formed in May 2011 to comprehensively investigate misconduct in the mortgage industry. Additional efforts by Harris to investigate the mortgage crisis include securing an estimated $20 billion for California in theNational Mortgage Settlement and sponsoring the California Homeowner Bill of Rights, a package of laws instituting permanent mortgage-related reforms.

In November of last year, Harris announced a $300 million settlement with J.P. Morgan Chase & Co. over its misrepresentations in residential mortgage-backed securities sold to CalPERS and CalSTRS.

 

Back to July 2014 Archive

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