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Fannie Mae to get $948 Million for Misrepresented Citi Loans

by devteam July 2nd, 2013 | Share

Fannie Mae has agreed to take $968rnmillion as compensation from Citigroup (Citi) for a large group ofrnmortgages the bank was accused of misrepresenting. Some 3.7 millionrnmortgages sold to Fannie Mae by Citi between 2000 and 2012 wererninvolved in the resolution agreement. Fannie Mae had maintained thernbank had not properly confirmed underwriting details for the loansrnsuch as borrower income. </p

Citi said the resolution agreementrncovers potential future origination-related representation andrnwarranty claims on this group of loans but does not release thernbank’s liability with respect to its servicing or other ongoingrncontractual obligations on the loans. There is also ongoingrnliability for a population of less than 12,000 loans originatedrnduring the same period with certain characteristics such asrnperformance guarantees or special credit enhancement. </p

In a press release announcing the settlement the bank saidrn”substantially all” of the payment was covered by Citi’s existingrnmortgage repurchase reserves as of the end of the first quarter ofrn2013. However the bank also announced it had set aside an additionalrn$245 million in its reserves for the second quarter, </p

Jane Fraser, CEO of CitiMortgage, said: “We have a strong andrnproductive relationship with Fannie Mae. This agreement resolvesrnsubstantially all potential future repurchase claims from them forrnloan originations from 2000 to 2012. As we work to deepen and enhancernfinancial relationships with our clients, we will continue to focusrnon the production of high-quality mortgage loans.”</p

Bradley Lerman, Fannie Mae Executive Vice President and GeneralrnCounsel said the resolution agreement is a sample of the company’srndesire to find common ground with its business partners. Thernagreement, he said, “resolves legacy repurchase issues, compensatesrntaxpayers for losses, and allows Fannie Mae and Citi to movernforward and strengthen our business relationship.</p

“We continue to focus on making strong progress inrnresolving repurchase requests with other lenders,rnand remain committed to helping people to buy,rnrefinance or rent a home.”

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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