By Dow Jones Business News,
June 24, 2014, 11:44:00 AM EDT
By Christina Rexrode
Mortgage investors expressed concern they will get stuck with part of the bill if Citigroup Inc. and Bank of
America Corp. settle with the Justice Department.
In a letter to Attorney General Eric Holder, the Association of Mortgage Investors asked that the banks receive
credit in their potential settlements for modifying only the loans owned by banks, not loans owned by investors.
"We stand firmly behind the principle that parties sued by the government or third-parties should not be able to
settle with assets they do not own, namely other people's money," wrote the AMI's executive director, Chris Katopis, in
a letter the organization released Tuesday.
AMI, whose members include investment firms DoubleLine Capital, AllianceBernstein and Angelo, Gordon & Co., has
tried to get traction in previous settlement negotiations, including J.P. Morgan Chase & Co.'s$13 billion agreement in
The four-page letter, dated June 20, doesn't specifically mention the DOJ's potential settlements with Bank of
America and Citigroup, but both banks are in the middle of negotiations.
Bank of America has offered to pay some $12 billion to settle the DOJ accusations, though the government is
demanding billions more, according to people familiar with the situation, The Wall Street Journal reported this month.
The Justice Department has demanded some $10 billion from Citigroup, though the bank has argued it should pay far less,
according to people familiar with the negotiations, the Journal also reported.
Any settlement likely would include both a cash payment and "consumer relief," where the banks get credit for
actions such as forgiving mortgage principal or reducing interest rates for struggling homeowners.
When J.P. Morgan settled with the Justice Department for $13 billion in November, $4 billion of that was in
consumer relief. In those formulas, J.P. Morgan received partial credit for modifying mortgages owned by other
investors, and more credit for modifying mortgages it owns.
In the National Mortgage Settlement of 2012, where banks including Bank of America, Citigroup, J.P. Morgan and
Wells Fargo & Co. agreed to pay a combined $25 billion, the banks also got credit for modifying loans they didn't own
but still serviced.
According to the latest tally from the Office of Mortgage Settlement Oversight, 39% of Bank of America's earned
credit came from modifying investor-owned loans, compared with just 0.04% of Citigroup's earned credit.
Nick Timiraos and Devlin Barrett contributed to this article.
Write to Christina Rexrode at email@example.com
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