Citigrouphas offered a payment of $1.125 billion in cash to settle mortgage repurchase claims based on representation and warranty breaches on 68 private lable securitization made by 18 institutional investors represented by the law firm Gibbs & Bruns.
The settlement requires the bank to make a binding offer to the trustees (Deutsche Bank/HSBC/US Bank and Wells Fargo), offering a payment of $1.125 billion in cash and a reimbursement of any trustee expense. The settlement offer would release Citi from having to buy back mortgages sold to the trusts.
“The Institutional Investors support the agreement and have asked the Trustees to accept it," Gibbs & Brun stated in a press release. The trustees have until June 30, 2014 to consider the offer with a possible 45-day extension. The agreement is also subject to approval by the Federal Home Finance Agency.
Barclays analysts said in a report published today that the settlement covers 68 deals from the CMTLI shelf from the 2005 to 2008 vintages, which have experienced actual realized collateral losses of about $10.6 billion. Based on Barclays' analysis. there deals could experience additional losses of $3.7 billion. “The $1.125 billion being offered is about 7.9% of the total losses and about 7.4% of the outstanding collateral balance,” the report stated.
Citigroup said in a press releasethat the settlement "resolves a significant legacy issue from the financial crisis and we are pleased to put it behind us."
However the agreement does not release the bank from potential investor claims relating to "alleged misrepresentations in the offering documents associated with these private-label securitizations, nor any potential regulatory actions," according to the Citi press release.
It also does not cover other Citi deals from shelfs, such as CMSI (26 deals from 2005-2008), CMALT (16 deals from 2005-2008) and CRMSI (six deals from 2005-08), according to Barclays.