Citigroup announced Monday that it has reached an agreement to settle an ongoing investigation of the Residential Mortgage-Backed Securities (RMBS) Working Group, part of the Financial Fraud Enforcement Task Force. Today’s agreement actual and potential civil claims by the U.S Department of Justice (DOJ), several state attorney generals (AGs), and the Federal Deposit Insurance Corporatation (FDIC) relating to RMBS and collateralized debt obligations (CDOs) issued, stuctured or underwritten by Citi between 2003 and 2008.
Under the terms of the settlement, Citigroup will pay a total of $4.5 billion in cash and provide $2.5 billion in consumer relief. The cash portion consists of a $4 billion civil monetary payment to the DOJ and $500 million in compensatory payments to the state AGs and the FDIC. The consumer relief will be in the form of financing provided for the construcion and preservation of affordable multifamily rental housing, principal reduction and forbearance for residential loans, as well as other direct consumer benefits from various relief programs. Citigroup has agreed to provide the consumer relief by the end of 2018.
Michael Corbat, Chief Executive Officer at Citigroup:
“The comprehensive settlement announced today with the U.S. Department of Justice, state attorneys general, and the FDIC resolves all pending civil investigations related to our legacy RMBS and CDO underwriting, structuring and issuance activities. We also have now resolved substantially all of our legacy RMBS and CDO litigation. We believe that this settlement is in the best interests of our shareholders, and allows us to move forward and to focus on the future, not in the past.”
In connection with the settlement, Citigroup will take a charge of approximately $3.8 billion pre-tax in the second quarter of 2014.