Citigroup to pay $1.13 billion to settle investor claims over mortgage-backed securities

NEW YORK, N.Y. – Citigroup has agreed to pay $1.13 billion to settle claims by investors seeking that the lender buy back billions in residential mortgage-backed securities.

The New York-based investment bank said Monday that the pact it reached with 18 institutional investors calls for Citigroup to make a binding offer to the trustees of 68 Citi-sponsored trusts that bundled some $59.4 billion in home loans into securities from 2005 to 2008.

The settlement offer, which must be approved by the trustees and the court, would release Citi from having to buy back mortgages sold to the trusts.

But the lender would remain vulnerable to other types of investor claims, including misrepresentations in the offering documents associated with the securities. It could also face potential actions by regulators.

The agreement also doesn’t cover home loans sold through private-label securitization trusts via Citi’s consumer mortgage business.

As part of the settlement, Citigroup said it has taken a charge of about $100 million for the first quarter.

Shares of Citigroup ended regular trading Monday down 56 cents, or 1.2 per cent, at $46.55. The stock regained 5 cents in extended trading.

A number of big banks, including Citigroup, JPMorgan and Goldman Sachs have been accused of abuses in sales of securities linked to mortgages in the years leading up to the 2008 financial crisis. Together, they have paid hundreds of millions in penalties to settle civil charges brought by the Securities and Exchange Commission, which accused them of deceiving investors about the quality of the bonds they sold.