Massive Citicorp Mortgage Fraud Settlement Pending

Massive Citicorp Mortgage Fraud Settlement Pending 2

The US Department of Justice looks close to closing an agreement with Citicorp to pay $7 billion in settlement of bad mortgages following a DOJ threat to sue the banking giant for defrauding investors over billions of dollars in shoddy mortgages deals leading up to the global financial crisis.

The massive settlement proposal has been reported by Reuters, the Wall Street Journal and the Financial Times reported the deal.

The two organizations have been pushing different amounts in settlement. The DOJ had been pressuring Citicorp for a $10 billion settlement while Citigroup had been holding out for $3 billion, according to the reports. News of the possible deal appeared to come as a relief to investors, who pushed Citigroup’s share price up about 1 percent in after-hours trading.

JPMorgan Chase & Co paid $13 billion in November to resolve a range of probes in a deal U.S. authorities said would serve as a template for other banks. Bank of America has also been in negotiations to resolve similar investigations.

The 2008 global financial crisis was caused in part by a massive flooding of subprime mortgage loans to unqualified borrowers onto the market. The dodgy loans were then broken up and sold by banks in securities to investors unaware of their shaky backing. When the housing and mortgage-markets crashed investors were stuck with billions of dollars in depleted or worthless securities.

The Citicorp mortgage fraud prosecution was something the bank was anxious to avoid at all costs, but it appears the cost will still be substantial.

Scroll to Top