Citigroup recently settled with the Justice Department a lawsuit with regard to its being involved with fraudulent practices concerning residential mortgages. As part of the settlement, Citigroup will be expending more than $7 billion.
Citigroup
Citigroup is required under the settlement with the Justice Department to modify mortgages of financially troubled homeowners. However, due to the numerous problems Citigroup has had with regard to financing residential mortgages, they do not have sufficient existing mortgages to satisfy a $7 billion settlement with the federal government. Therefore, in addition to being involved in providing mortgage modifications to its struggling mortgage holders, Citibank has agreed to finance affordable housing to be rented to individuals in “high cost of living areas.”
No Criminal Prosecutions
Commentators with regard to the settlement have found the federal government has not held banks accountable to the level they should regarding the real estate crisis created in the United States by faulty mortgage practices. It should be pointed out no Citibank executives were charged criminally or prosecuted with regard to their fraudulent mortgage activities.
Attorney General Eric Holder however, has indicated the settlement with Citibank does not absolve the bank or its employees of the possibility of facing criminal charges. He went on to state, “the bank’s misconduct was egregious.”
Affordable Housing
Citibank has agreed to provide $108 million for affordable housing as part of this settlement. The rental housing component of the settlement will cause Citibank to provide financing for housing developments may result in financial losses to the bank. Justice Department spokesman Tony West, recently stated regarding the settlement, “we hope this measure will bring relief to families who were pushed into the rental market after losing their homes in the wake of the financial crisis.”
Elliot Schlissel is a foreclosure attorney. He litigates predatory lending issues, bad bank practices, fraudulent mortgage practices, and other issues involving financial institutions. He also helps his clients obtain mortgage modifications. Elliot is the former President of the Commercial Lawyers Conference of New York.
