may pay $7 billion to resolve U.S. mortgage probes: source
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[July 09, 2014]
By Karen Freifeld and Aruna Viswanatha
NEW YORK/WASHINGTON (Reuters) - Citigroup
Inc is close to paying about $7 billion to resolve a U.S. probe into
whether it defrauded investors on billions of dollars worth of mortgage
securities in the run-up to the financial crisis, a source familiar with
the matter said on Tuesday.
A majority of the settlement is expected to be in cash, but the
figure also includes several billion dollars in help to struggling
borrowers, the source said.
An announcement of the settlement between the bank and the U.S.
Department of Justice could come as early as next week, the source
A Citigroup representative declined comment. A Justice Department
spokeswoman did not respond to requests for comment.
A settlement of around $7 billion for Citigroup would be higher than
analysts had expected based on the bank's mortgage securities
Some Wall Street analysts had previously estimated that Citigroup
likely had about $3 billion of reserves set aside for a related
settlement. U.S. authorities had demanded more than $10 billion last
month, Reuters reported.
Talks between U.S. authorities and Citigroup stalled last month
after both sides stood far apart on a settlement figure and the
Justice Department had prepared to sue the bank.
The bank is scheduled to report second-quarter results on Monday.
Analysts, on average, have estimated the company would earn $3.4
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U.S. Attorneys offices in Brooklyn and Colorado have been
investigating the bank as part of a larger task force probing faulty
mortgage securities that helped fuel the housing bubble in the
mid-2000s and contributed to its collapse.
JPMorgan Chase & Co paid $13 billion in November to resolve a range
of probes from the task force, in a deal that U.S. authorities said
would serve as a template for other banks. Bank of America Corp has
also been in negotiations to resolve similar investigations.
(Reporting by Aruna Viswanatha in Washington and Karen Freifeld in
New York, with additional reporting by David Henry in New York;
Editing by Lisa Shumaker)
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