Citigroup Inc. is reportedly close to reaching an agreement with federal prosecutors over its sale of faulty mortgage-backed securities (MBS) in the run-up to the 2008 financial crisis.
According to a Wall Street Journal report, citing an anonymous source close to the case, Citigroup will pay at least $4 billion in penalties to settle the claims, in addition to another $3 billion in borrower relief, much of which has already been paid in the form of mortgage modifications.
Initially, Citigroup had offered a settlement of less than $4 billion, however, federal prosecutors had balked at that offer, as they were initially seeking more than $10 billion. Due to the lack of agreement, talks broke down in June and federal prosecutors were preparing to sue the bank – which could still happen if a settlement isn't reached.
In April, Citigroup announced that it had reached a $1.13 billion settlement to resolve claims brought by investors over faulty mortgage-backed securities that the bank sold from 2005 to 2008.
As per the agreement with 18 institutional investors, Citigroup made a binding offer to the trustees of 68 Citi-sponsored mortgage securitization trusts for $1.125 billion, plus certain fees and expenses. The 68 trusts issued in the aggregate $59.4 billion of residential MBS, according to a bank press release.
As a result of that settlement, the bank had to take an additional charge of approximately $100 million in the first quarter of this year.
For more on this most recent settlement deal, check out the Wall Street Journal report.