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Citigroup, Inc., Reaches $7 Billion Deal to Settle Mortgage-Bond Probe

citigroup Citigroup, Inc., Reaches $7 Billion Deal  to Settle Mortgage Bond ProbeAttorney General Kamala D. Harris, along with the U.S. Department of Justice and state partners, today 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 January 1, 2009.

Front Citigroup1 300x184 Citigroup, Inc., Reaches $7 Billion Deal  to Settle Mortgage Bond Probe

Tony West, Justice Department’s lead negotiator in the Citigroup case.

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,” Attorney General Harris said. “This settlement holds Citi accountable and compensates the state’s pension funds that protect the retirement savings of hardworking Californians.”

Kamala D Harris 258x300 Citigroup, Inc., Reaches $7 Billion Deal  to Settle Mortgage Bond Probe

Kamala D. Harris, California Attorney General

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. 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.

An investigation conducted by Attorney General 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. $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 Attorney General Harris’s Mortgage Fraud Strike Force, which was formed in May 2011 to comprehensively investigate misconduct in the mortgage industry. The Attorney General’s additional efforts to investigate the mortgage crisis include securing an estimated $20 billion for California in the National Mortgage Settlement and sponsoring the California Homeowner Bill of Rights, a package of laws instituting permanent mortgage-related reforms.

In November of last year, Attorney General 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.

For more information on the U.S. DOJ settlement visit: http://www.justice.gov/

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