July 14, 2014

Citigroup to pay $7B in MBS case

July 15, 2014 – Citigroup will pay $7 billion in a settlement with the Justice Department over claims that the entity misled investors about the riskiness of some mortgage-backed securities sold before the 2008 financial crisis.

The deal was reached over the weekend and requires the firm to pay $2.5 billion in relief to consumers. Bloomberg reported that of the $7 billion, the firm will pay $4 billion to the Justice Department, about $300 million to state attorneys general and about $200 million to FDIC.

The Justice Department's investigation into the sale of faulty MBS also extended to Bank of America Corp. and JPMorgan Chase. JPMorgan Chase agreed to pay $13 billion in November to settle similar federal and states allegations.

In November, NCUA recovered $1.4 billion in the JPMorgan settlement for a wide range of activities undertaken during the housing downturn, including the sale to corporate credit unions of faulty MBS by Washington Mutual, which JPMorgan Chase acquired in 2008.

Before that settlement, NCUA had recovered $335 million from parties that sold bad MBS to the corporates – it won a $20.5 million settlement from Citigroup in 2011.

NCUA has filed 10 lawsuits against several other firms, including Barclays Capital, Credit Suisse, Goldman Sachs, JPMorgan Securities, RBS Securities, UBS Securities, Wachovia, and Bear, Stearns, alleging violations of federal and state securities laws in the sale of MBS to five now-defunct corporate credit unions.