Fannie Mae has agreed to take $968 million as compensation from Citigroup (Citi) for a large group of mortgages the bank was accused of misrepresenting. Some 3.7 million mortgages sold to Fannie Mae by Citi between 2000 and 2012 were involved in the resolution agreement. Fannie Mae had maintained the bank had not properly confirmed underwriting details for the loans such as borrower income.
Citi said the resolution agreement covers potential future origination-related representation and warranty claims on this group of loans but does not release the bank's liability with respect to its servicing or other ongoing contractual obligations on the loans. There is also ongoing liability for a population of less than 12,000 loans originated during the same period with certain characteristics such as performance guarantees or special credit enhancement.
In a press release announcing the settlement the bank said "substantially all" of the payment was covered by Citi's existing mortgage repurchase reserves as of the end of the first quarter of 2013. However the bank also announced it had set aside an additional $245 million in its reserves for the second quarter,
Jane Fraser, CEO of CitiMortgage, said: "We have a strong and productive relationship with Fannie Mae. This agreement resolves substantially all potential future repurchase claims from them for loan originations from 2000 to 2012. As we work to deepen and enhance financial relationships with our clients, we will continue to focus on the production of high-quality mortgage loans."
Bradley Lerman, Fannie Mae Executive Vice President and General Counsel said the resolution agreement is a sample of the company's desire to find common ground with its business partners. The agreement, he said, "resolves legacy repurchase issues, compensates taxpayers for losses, and allows Fannie Mae and Citi to move forward and strengthen our business relationship.
"We continue to focus on making strong progress in resolving repurchase requests with other lenders, and remain committed to helping people to buy, refinance or rent a home."