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Citigroup to pay $7 bn subprime mortgage settlement: report

AFP, Monday 14 Jul 2014
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Federal regulators and Citigroup are set to announce Monday a $7 billion settlement to resolve charges that the bank sold faulty mortgage-backed securities ahead of the 2008 financial crisis, US media reported.

The deal ends months of negotiations between US Treasury Department investigators and Citigroup, people briefed on the matter told The New York Times.

Citigroup initially proposed paying $363 million, while the Department of Justice was seeking $12 billion and threatening to sue the bank.

Bank of America is reportedly in talks with the Justice Department on a similar deal for $12 billion or more. That would follow a $9.5 billion settlement with the Federal Housing Finance Agency over mortgage-backed securities sold by BofA to mortgage giants Freddie Mac and Fannie Mae.

US banks have already been charged nearly $50 billion in penalties, relief and disgorgement of profits by federal and state justice authorities and regulators since 2011 over shoddy mortgage bonds and mortgage abuses.

The government has charged that the banks falsely claimed the investment vehicles were low-risk when many were linked to risky mortgages that ended up defaulting.

JPMorgan Chase in November agreed to pay $13 billion to settle several mortgages suits with the Justice Department.

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