Citigroup Fined $8.6 Million For Improperly Handling Mortgage Documents

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Citigroup has been fined $8.6 million by the Federal Reserve Board for improper execution of residential mortgage-related documents.

The $8.6 million penalty addresses the deficient execution and notarization of certain mortgage-related affidavits prepared by a subsidiary, CitiFinancial.

The improper practices occurred in 2015 and were corrected. CitiFinancial exited the mortgage servicing business in 2017.

The penalty is in connection with action taken by the Fed dating back to 2010.

In its consent order, the Fed explains that following a 2010 review of major residential mortgage servicers, federal banking agencies raised concerns that Citigroup had not adequately assessed the risks associated with residential mortgage loan servicing, foreclosure activities and related functions.

In 2011, the Fed issued a consent order against Citigroup and CitiFinancial, requiring that they take specific measures to address deficiencies related to mortgage servicing.

Then, in February 2012, the Fed fined Citigroup, based on the conduct that was the subject of the 2011 consent order.

Starting in the second half of 2014, Citigroup began taking steps to exit the servicing business of CitiFinancial.

At the time it fully exited the business in 2017, Citigroup reported that, from January 2015 through August 2015 (and while it was still under the 2011 consent order), “mortgage-related affidavits were executed by CitiFinancial employees making assertions regarding the ownership of the mortgage note (‘Lost Note Affidavits’) in which the affiant represented that the assertions in the affidavit were based on personal knowledge or based on a review by the affiant of the relevant books and records, when, in certain cases, the signer was not in a position to have personal knowledge or review the relevant books and records” and, in addition, “‘Lost Note Affidavits’ were not properly notarized as they were not signed or affirmed in the presence of a notary,” the consent order states.

The proper signing and notarization of an affidavit of lost note is critical to ensuring that a replacement note is sufficient to prove both the terms and the lender’s right of enforcement.

The Fed also announced the termination of a separate enforcement action from 2011 against Citigroup and CitiFinancial related to residential mortgage loan servicing.

The termination of the action was based on evidence of sustainable improvements.

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