Citi To Pay $7B To Settle Mortgage Investigation; Includes $2.5B In Consumer Relief

Nearly a week after it was first reported that Citigroup and the U.S. Justice Dept. had reached a deal to close the government’s investigation into toxic mortgage-backed securities sold by the bank in the years leading up to the crash of the housing market, Citi has now confirmed a settlement valued at a total of $7 billion.

According to Citi, the bank will pay the DOJ a cash penalty of $4 billion, plus another $500 million in compensatory payments to the FDIC and various state Attorneys General.

Citi does not provide significant detail on the remaining $2.5 billion in planned consumer relief, but says it will take the 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.”

The bank had been accused of knowingly packaging worthless mortgages into securities between 2003 and 2008, and then misleading investors about the quality of the loans.

“Despite the fact that Citigroup learned of serious and widespread defects among the increasingly risky loans they were securitizing, the bank and its employees concealed these defects,” explains U.S. Attorney General Eric Holder in prepared statements.