Citigroup in $968M MBS Settlement - Analyst Blog
July 03 2013 - 4:34PM
Zacks
Recently, Citigroup Inc. (C) announced the
settlement of a lawsuit filed by the Federal National
Mortgage Association (FNMA), also known as Fannie Mae. The
latter had accused the banking major of misrepresenting
mortgage-backed securities (MBS). The company shelled out a sum of
$968 million to Fannie Mae for the settlement.
The agreement saw to the resolution of troubled loans and future
claims on mortgages made between 2000 and 2012 by Fannie Mae. The
majority of the settlement amount will be paid from Citigroup’s
current reserves. In the lawsuit, Fannie Mae had charged Citigroup
of duping the mortgage financing company into buying risky MBS
worth about $3.7 billion.
In May this year, Citigroup settled a lawsuit filed by the Federal
Housing Finance Agency (FHFA), also accusing it of misrepresenting
MBS. FHFA had accused Citigroup of deceiving Fannie Mae and
Federal Home Loan Mortgage Corporation (FMCC),
popularly known as Freddie Mac, into buying MBS worth $3.5
billion.
This was the second among a total of 18 lawsuits filed by the
federal agency against banks in 2011. FHFA had imputed the banks of
selling faulty securities worth $200 billion to Fannie Mae and
Freddie Mac through misleading statements, which violated security
laws.
Citigroup is the second bank after Bank of America
Corp (BAC) to arrive at a settlement. BofA announced an
agreement with Fannie Mae worth about $10.3 billion in Jan 2013. It
included the resolution of all outstanding and potential
repurchase, along with other claims relating to all major
residential mortgage loans originated and sold directly to Fannie
Mae by BofA from Jan 1, 2000 through Dec 31, 2008.
The lawsuit settlement by Citigroup evinces its efforts to resolve
all mortgage related issues, and thereby reduce costs over the
upcoming period. Moreover, such agreements will likely help revive
the economy, and bode well for the company.
Citigroup currently carries a Zacks Rank #3 (Hold).
BANK OF AMER CP (BAC): Free Stock Analysis Report
CITIGROUP INC (C): Free Stock Analysis Report
FREDDIE MAC (FMCC): Get Free Report
FANNIE MAE (FNMA): Get Free Report
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