Citigroup’s record $7 billion formally announced Monday to settle its part in selling toxic mortgage-backed securities that contributed to the run-up to the 2008 financial crisis.
Citigroup said it would pay $4.5 billion in cash to settle federal and state civil claims by various entities related to mortgage-backed securities. The rest will go to aid consumers.
But Justice Department officials stressed a new twist to this relief portion of the deal, compared to previous settlements with big banks that included compensation. The deal requires “innovative consumer relief” that will help rectify the harm caused by Citi’s conduct,” said U.S. Associate Attorney General Tony West.
“This consumer relief menu includes new measures such as $200 million in typically hard-to-obtain financing that will facilitate the construction of affordable rental housing, bringing relief to families pushed into the rental market in the wake of the financial crisis,” West said.
Citigroup will pay out about $2.5 billion of the $7 billion in the form of relief to aid consumers harmed by the unlawful conduct of Citigroup, officials said.
That relief includes:
- Loan modification for underwater homeowners,
- Refinancing for distressed borrowers,
- Down payment and closing cost assistance to homebuyers,
- Donations to organizations assisting communities in redevelopment and,
- Affordable rental housing for low-income families in high-cost areas.
An independent monitor will be appointed to determine whether Citigroup is satisfying its obligations.
If Citigroup fails to live up to its agreement by the end of 2018, it must pay liquidated damages in the amount of the shortfall to NeighborWorks America, a non-profit organization and leader in providing affordable housing and facilitating community development.