The agreement covers 3.7 million potentially dangerous residential loans originated between 2000 and 2012 and sold to Fannie Mae by Citi. It had been alleged that Citi, like other lenders, had misrepresented the quality of the loans sold to Fannie, which ended up buying a mountain of mortgages that should never have been approved in the first place.
When homeowners stopped paying — whether it was due to financial hardship, or because their interest rates went soaring and they were unable to pay, or they simply chose to walk away from their mortgages — Fannie Mae saw substantial losses.
While $968 million is nothing to scoff at, it’s a pittance compared to the huge settlement Bank of America reached with Fannie back in January. In that instance, BofA agreed to pay $3.55 billion in cash to Fannie, with another $6.75 billion going toward repurchasing the questionable mortgages sold off by Countrywide.
Today’s announcement does not settle repurchase claims made against Citi by that other bailed-out mortgage biggie Freddie Mac.