Citigroup late Wednesday disclosed that it will pay $590 million to settle a class action civil suit brought by investors seeking damages from the bank’s exposure to subprime mortgages.
Among other things, investors accused the top ranked mortgage lender/servicer of failing to disclose important details about its investments in subprime MBS and related securities, including CDOs.
The settlement covers Citigroup shareholders who bought stock in the bank from February 2007 to April 2008.
In 2007, a Citigroup affiliate called CitiFinancial out of Baltimore was a top 10 ranked subprime lender, according to figures compiled by National Mortgage News and the
In 2007 Citigroup’s investment banking division was one of the largest securitizers of subprime loans in the nation. Its strategy entailed taking A- to D loans from its own CitiFinancial affiliate and other firms and packing these nonprime mortgages into bonds.
In some cases Citigroup invested in its own MBS.
According to the law suit, investors accused the bank of concealing its “failure to write down securities tied to subprime debt.”
In a press statement Citigroup said it denies the allegations but is settling the case to avoid prolonged litigation.
