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Citigroup Agrees to $1.13B Settlement over Mortgage Bonds

APR 8, 2014 10:35am ET
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Citigroup Inc. agreed to pay $1.13 billion to settle claims from mortgage-bond investors as it seeks to curb liabilities tied to the financial crisis. It took a $100 million first-quarter charge.

The 68 securitization trusts covered by the settlement issued a combined $59.4 billion in mortgage-backed securities from 2005 to 2008, the New York-based bank said yesterday in a statement. The agreement covers 18 investors represented by Gibbs & Bruns LLP and trustees have until June 30 to accept the deal, the law firm said in a separate statement. The accord must be approved by the Federal Housing Finance Agency.

Citigroup, the third-biggest U.S. bank, is resolving a portion of liabilities tied to mortgages it packaged and sold to investors in the run-up to the 2008 crisis. JPMorgan Chase & Co. and Bank of America Corp., the two largest U.S. lenders, previously agreed to multibillion-dollar settlements with Gibbs & Bruns clients.

"This settlement resolves a significant legacy issue from the financial crisis and we are pleased to put it behind us," Citigroup said in its statement.

The bank, led by Chief Executive Officer Michael Corbat, had been told by the law firm that its clients hold certificates in 110 trusts, according to an annual filing with the Securities and Exchange Commission.

The 18 investors include Goldman Sachs Group Inc., BlackRock Inc. and Pacific Investment Management Co.

The agreement would release Citigroup's obligation to repurchase loans sold to the trusts, according to the bank's statement. It doesn't prevent investors from claiming misrepresentations on offering documents or other potential regulatory actions.

The bank is set to report first-quarter earnings on April 14. It will post adjusted earnings of $1.15 a share, according to the average estimate of 26 analysts surveyed by Bloomberg.

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