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N.Y. shares in $7 billion national settlement with Citigroup

Rochester Business Journal
July 14, 2014

New York’s share of a $7 billion national settlement with Citigroup Inc. will come to at least $182 million, state Attorney General Eric Schneiderman said Monday.

Citigroup is one of several banking giants that has agreed to settle charges of misconduct in the mortgage-backed securities debacle of several years back with the Residential Mortgage Securities Working Group.

Schneiderman serves as co-chairman of the working group, a task force including federal and state officials formed in 2012.

Other financial institutions targeted by the task force  include Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and Ally Financial Inc.—the five largest U.S. mortgage servicers. 

Subprime mortgages lent by those banks and others to less than creditworthy borrowers largely are blamed for the 2008 financial crisis that sent the U.S. economy spiraling into recession.

Lenders packaged the high-risk mortgages in bonds, which they sold as investment-grade securities. The strategy worked until the continually rising home values that had kept the mortgage-backed bonds afloat began to tumble, exposing the securities’ inherent shakiness.

Terms of the Citigroup settlement—negotiated by Associate U.S. Attorney General Tony West—call for Citigroup to fund legal services and housing counseling agencies that provide no-cost representation to struggling homeowners and to provide financing to housing projects for low-income renters.

New York’s share of the settlement breaks down to $92 million in cash and $90 million worth consumer relief.

Relief the bank promises to provide includes forgiveness of some underwater borrowers’ first and second mortgage principal amounts, refinancing to lower mortgages’ interest rates and financial help for first-time and returning homebuyers on closing costs and down payments.   

The state Attorney General’s Homeowner Protection Program is one source through which Citigroup mortgage relief could be channeled. Kicked off by Schneiderman’s office in October 2012, the program has helped fund some 90 local organizations’ mortgage relief efforts.

The program’s assistance so far reached 30,000 New York families, including 1,712 in the Western Southern Tier and Rochester region, Schneiderman spokesman Nick Benson said. A total of 739 loan modifications in the region have either been approved or await final approval under the program.

    
(c) 2014 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail service@rbj.net.
 



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