Citigroup agreed to pay $7 billion to settle government claims relating to RMBS and collateralized debt obligations (CDOs) that it issued, structured or underwrote between 2003 and 2008.
The settlement means the bank will take a charge of approximately $3.8 billion pre-tax in the second quarter of 2014, the bank said in a press release.
Under the terms of the settlement, Citigroup will pay a total of $4.5 billion in cash and provide $2.5 billion in consumer relief. The cash portion consists of a $4 billion civil monetary payment to the U.S. Department of Justice and $500 million in compensatory payments to the state attorneys general and the Federal Deposit Insurance Corporation.
The consumer relief will be in the form of financing provided for the construction and preservation of affordable multifamily rental housing, principal reduction and forbearance for residential loans, as well as other direct consumer benefits from various relief programs. Citigroup has agreed to provide the consumer relief by the end of 2018.
“The comprehensive settlement announced today with the U.S. Department of Justice, state attorneys general, and the FDIC resolves all pending civil investigations related to our legacy RMBS and CDO underwriting, structuring and issuance activities,” said Michael Corbat, chief executive of Citigroup. “We also have now resolved substantially all of our legacy RMBS and CDO litigation. We believe that this settlement is in the best interests of our shareholders, and allows us to move forward and to focus on the future, not the past.”