Citigroup to settle MBS suit for $24.9 mln
NEW YORK |
NEW YORK Aug 27 (Reuters) - Citigroup Inc has agreed to pay nearly $25 million to settle a lawsuit by investors who said they were misled about the quality of mortgage-backed securities they bought just before the U.S. housing market crashed, according to court papers filed Monday in federal court.
The 2008 lawsuit accused Citigroup of lying about lenders' deteriorating mortgage underwriting and appraisal standards during the subprime mortgage boom, and understating the risk of default. As the underlying mortgages began to default, the value of the investments plummeted, the lawsuit alleged.
The Ann Arbor Employees' Retirement System and Greater Kansas City Laborers Pension Fund had led the lawsuit on behalf of investors who purchased certificates in one of two mortgage-backed securities trusts from Citigroup Mortgage Loan Trust Inc in 2007.
The $25 million settlement represents about $13.25 per $1,000 in initial face value of the two trusts named in the lawsuit, which would be equal to about $1.88 billion, according to court documents submitted by lead class counsel Robbins Geller Rudman & Dowd.
A Citigroup spokeswoman declined to comment.
The settlement is the latest struck between banks and investors in the fallout from the MBS boom and bust.
In December, Bank of America Corp's Merrill Lynch unit agreed to pay $315 million to resolve a lawsuit brought by investors in 18 mortgage-backed securities trusts.
A month earlier, Deutsche Bank AG and Citigroup agreed to pay a combined $165.5 million in a settlement with the National Credit Union Agency over their roles in underwriting mortgage-backed securities purchased by five credit unions.
The case is City of Ann Arbor Employees' Retirement System et al. v. Citigroup Mortgage Loan Trust Inc et al., U.S. District Court for the Eastern District of New York, No. 08-1418.
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