By Dow Jones Business News, September 25, 2013, 05:13:00 PM EDT
By Saabira Chaudhuri
Citigroup Inc. ( C ) on Wednesday struck a deal to pay Freddie Mac ( FMCC ) $395 million to settle claims it sold faulty
mortgages to the mortgage-finance company, removing another area of contention in Citi's mortgage business.
The agreement covers potential future buyback claims for origination-related representation and warranty claims on 3.7
million loans sold to Freddie between 2000 and 2012, Citi said.
The payment was covered by Citi's existing mortgage repurchase reserves as of the end of its second quarter. Citi also
noted that it has enough reserves for loans not covered by the agreement.
"Today's agreement with Freddie Mac marks another important milestone in successfully resolving Citi's remaining
legacy mortgage issues," CitiMortgage Chief Executive Jane Fraser said in a prepared statement.
In July, Citi revealed it was paying Fannie Mae (FNMA) $968 million to settle claims that Citi sold faulty mortgages
At issue in these cases are mortgages originated largely before the financial crisis that Fannie, Freddie, and private
investors have alleged weren't underwritten as prudently as required by agreements Citi struck with the buyers of the
Citi on Wednesday said it will continue to work with Freddie to buyback any mortgage loans sold to Freddie that don't
meet Freddie's requirements.
The government seized control of Freddie and Fannie in September 2008 when mounting mortgage losses caused the firms'
near collapse. They have since relied on several injections of taxpayer funds to stay afloat, though more recently the
improving housing market has helped them avoid seeking additional financial support.
Shares of Citi were up by 0.9% to $49.40 in recent trading after the market closed. The stock has risen 25% so far
Write to Saabira Chaudhuri at email@example.com
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