Citi to pay Fannie Mae nearly $1 billion over flawed mortgages
Resolving a lingering headache from the housing bust, Citigroup Inc. agreed to pay nearly $1 billion to Fannie Mae to cover Citi’s liability for potential flaws in 3.7 million mortgages it sold to the housing-finance giant from 2000 through 2012.
Fannie Mae, the biggest buyer and guarantor of home loans, had previously announced similar but far bigger settlements with Bank of America -- $1.52 billion in January 2011 and a whopping $10.35 billion this past January. The Citi settlement is for $968 million.
Quiz: How much do you know about home loans?
When lenders sell mortgages to be bundled into securities, they make so-called representations and warranties about the quality of the loans. They can be compelled to buy back the mortgages if those promises prove false.
The Citigroup settlement, announced Monday, puts to rest nearly all the repurchase demands made against Citi by Fannie Mae, which was rescued from failing during the financial crisis by a taxpayer bailout that helped keep the housing market from a meltdown.
“This resolution is an example of our desire to work together with our business partners to find common ground,” Bradley Lerman, general counsel at Fannie Mae, said in a statement Monday.
“Today’s agreement resolves legacy repurchase issues, compensates taxpayers for losses, and allows Fannie Mae and Citi to move forward and strengthen our business relationship.”
Citigroup said in a statement that most of the funds for the settlement would come from reserves already set aside for claims over soured loans. It also said it has adequate reserves to cover its liability for an additional 12,000 mortgages not covered by the settlement.
Jane Fraser, the chief executive of CitiMortgage, said the bank’s relationship with Fannie Mae is “strong and productive” despite the disputes over troubled loans.
Citigroup shares were up $1.11, or 2.3%, at $49.08 in midday trading.
ALSO:
BofA to pay Fannie $1.5 billion over mortgages
Still awash in mortgage woes, BofA bashes Fannie Mae
Bank of America to pay Fannie $10 billion over mortgages
