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Borrowers get $2.5B from Citi

By Polyana da Costa · Bankrate.com
Tuesday, July 15, 2014
Posted: 11 am ET

Citigroup and the Justice Department have reached a $7 billion agreement to settle a federal investigation related to faulty mortgage securities that the bank sold leading to the 2008 financial crisis.

About $2.5 billion of the settlement is supposed to be used to offer relief to mortgage borrowers, according to the Justice Department. The relief would include:

  • Loan modification for underwater borrowers.
  • Refinancing for distressed borrowers.
  • Down payment and closing cost assistance to homebuyers.
  • Donations to organization assisting communities in redevelopment and affordable rental house for low-income families in high-cost areas.

They'll figure out the details while you pay

Citi has not specified who would be eligible for assistance and when consumers would be notified. The lender says in the "coming weeks and months" it will evaluate who is eligible under the settlement programs and will contact the borrowers.

"The assistance available as a result of the settlement will depend on each individual situation," says a Citi spokeswoman. "Eligibility criteria and specific solutions are still being determined. In the meantime, it is important for customers to continue to make payments in a way consistent with their loan agreements."

Most of the money, $4 billion, will be paid to the Justice Department as a civil penalty. The rest will go to other entities, including the states of California, New York, Illinois, Massachusetts and Delaware.

Bank lied to mortgage investors

According to Attorney General Eric Holder, “The bank's activities contributed mightily to the financial crisis that devastated our economy in 2008."

The settlement says Citigroup made representations to mortgage investors about the quality of the loans it bundled to sell to investors. The bank sold loans the loans knowing they were problematic, according to the settlement's statement of facts.

"On a number of occasions, Citigroup employees learned that significant percentages of the mortgage loans reviewed in due diligence had material defects," according to the DOJ's news release. "In one instance, a Citigroup trader stated in an internal email that he 'went through the Diligence Reports and think(s) (they) should start praying … (he) would not be surprised if half of these loans went down. … It’s amazing that some of these loans were closed at all.'”

The DOJ's investigation involved residential mortgage-backed securities issued or underwritten by Citigroup in 2006 and 2007.

How the settlement will be implemented

An independent monitor will be appointed to oversee the settlement. If Citigroup fails to live up to its agreement by the end of 2018, it must pay liquidated damages in the amount of the shortfall to NeighborWorks America, a nonprofit organization.

What do you think of the settlement?

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50 Comments
Keeg
July 27, 2014 at 11:41 pm

WTH?!?! This money should all be going to the people who got hammered by CITI and not to new homebuyers or affordable housing.

FedUpWithNobels
July 19, 2014 at 11:16 pm

Could somebody please explain to me what Eric Holder and the Justice Department is doing with their portion of the fines? WE are literally talking billions of dollars they have collected so far.

jim
July 19, 2014 at 9:34 pm

TO C9cuta; If you are referring to Obama you are the moron. That happened under that Idiot Bush.

C9cuta
July 19, 2014 at 9:19 pm

It should had not happen to begin with and that is the Fed's fault for not having regulations concerning the banks, wall street, and lending institutions and that responsibility falls on the president also as he is supposed to have advisors in all matters. Remember that before he took office the first term he said him and his staff would hit the ground running. My question now is: What will happen to all those people who lost their home due to the banks being crooked which were just about all of them. Most people are morons really, they do not recall past events and able to discern a bit.

He is guilty as charged in my book. Everything he has done is negative and the worst is lying to the people big time. Grow up please.

onetonramdad
July 19, 2014 at 8:42 pm

that's to bad the the fed's have to take so much give it back to those who was defrad'ed. which I'am not one of. just saying

Rcj226
July 19, 2014 at 8:31 pm

marc Stanton, how can you blame Obama on this? It's a good thing that he is going after these crocked banks and Wall Street cheaters. Jeez, the President can do no right in your eyes. Give him a little credit.

marc Stanton
July 19, 2014 at 7:26 pm

Too little too late. Harmed homeowners will see only a pittance of their actual loss. The lawyers will collect the lion share of the settlement. Maybe if Obama got off his lazy ars and addressed this timely, millions wouldn't have lost their homes. He single handedly destroyed and continues to destroy this country. He has achieved the honor of being the worst president the United States has ever had in office.

Daffy 1
July 19, 2014 at 4:01 pm

You do not have to refi through citi to get low rates. And today the rates are almost as low as they were a year or two ago--hovering around 4% or less. I got quoted 3.875.

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