CITIGROUP Agrees To Pay Freddie Mac $395 Million For Toxic Mortgages & Poor Loan Servicing

#Citi

"Citigroup To Pay Freddie Mac $395 Million To End Mortgage Claims"

Citigroup Inc. (C), the third-biggest U.S. bank, agreed to pay Freddie Mac $395 million to resolve repurchase claims on soured mortgages sold to the government-backed firm over more than a decade.

The accord covers about 3.7 million loans sold to Freddie Mac between 2000 and 2012, the New York-based company said yesterday in a statement. The payment was covered by repurchase reserves as of June 30, Citigroup said.

The biggest U.S. home lenders, including Bank of America Corp.and Citigroup, faced mounting pressure after the housing crisis to resolve claims on faulty mortgages sold to Fannie Mae and Freddie Mac, the U.S.-owned firms that took a $187.5 billion bailout. Citigroup announced a deal in July to pay Fannie Mae $968 million for loans over a similar period.

The deal with Freddie Mac is “another important milestone in successfully resolving Citi’s remaining legacy mortgage issues,” Jane Fraser, chief executive officer of the firm’s CitiMortgage unit, said in the statement.

The accord doesn’t release the bank from liability tied to servicing the loans.

It excludes less than 1,000 loans from the period with “certain characteristics,” including those already in the process of being repurchased. Citigroup said it believes it’s also adequately reserved for those.

The biggest U.S. home lenders, including Bank of America Corp. and Citigroup Inc. faced...

The company had $719 million in reserves for buying back faulty mortgages at the end of the June, according to a July 15presentation.

The bank added $3.9 billion to its reserves since 2009 through June, according to data compiled by Bloomberg.

U.S. Seizure

Freddie Mac and Fannie Mae, its larger rival, bought about $2.2 trillion of mortgages from the 15 biggest banks and Ally Financial Inc.

(ALLY) between 2006 and 2009, according to Inside Mortgage Finance, a trade journal.

Regulators seized the two firms in 2008 after their purchases of risky loans pushed them to the brink of collapse.

Citigroup sold $62.4 billion of mortgages to Freddie Mac between 2005 and 2009, according to data from Washington-based Compass Point Research & Trading LLC.

The bank’s CEO, Michael Corbat, 53, named Fraser in May to run the mortgage operation.

She has sought to reduce staff and move beyond legacy issues.

Citigroup said earlier this week it’s cutting about 1,000 jobs in its home-lending business as refinancings slow.

The bank said earlier this month that it closed a Danville, Illinois, facility, leading to 120 job cuts, and fired some telephone sales agents.

Separately, the firm is hiring employees to originate new mortgages for home purchases as opposed to refinancings, a person familiar with the moves said this week.

Citigroup created $65 billion of mortgages last year, or about 3.4 percent of the total market, according to Inside Mortgage Finance, a trade publication.

#CITI

CITI MORTGAGE IGNORED OBAMA'S NATIONAL MORTGAGE SETTLEMENT BY PUSHING FAKE LOAN MODIFICATIONS TO STEAL HOMES!!

THAT'S HOW CITI'S PROFITS SOARED!!

In February 2012 Pres Obama signed a National Settlement Agreement w/ the CEOs of America's four largest Banks: BOFA, Chase, Citi & Wells Fargo.

Another MORTGAGE SETTLEMENT was signed in January of 2013.

Since then both BOFA & Citi have basically ignored the Terms of this Settlement.

Especially Citi Mortgage!

Yet Congress allowed Citi Mortgage to rake in huge PROFITS at the expense of Struggling Homeowners, many whom are now Homeless because Citi Mortgage Stole their Homes via FAKE Loan Modifications.

So How was this being done?

Five Different Ways: (FORT MILL, S.C. & O'FALLON, MO. LOCATIONS)

**1) Send Struggling Borrowers on a Wild Goose Paper Chase by asking them to send in the SAME Financial Docs over & over again.

**2) Hire Loss Mitigation Specialists, Poorly train them & Use their names to Foreclose on Millions of Properties.

**3) String Borrowers along on a Doc Chase until the Foreclosure Statue of Limitations in each State Expires.

**4) Grant only allow a Handful of Borrowers HAMP Certifications.

**5) Reward Managers & Loss Mitigation Specialists Huge Bonuses for helping to Steal Homes from Struggling Borrowers via FAKE Loan Modifications.



Sources: AP; Bloomberg; NJ.com; NY Times

Geithner's Failure! Banks Returning To Toxic Assets

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No Good Deed Goes Unpunished As Banks Seek Profits


To understand the meaning of no good deed goes unpunished, Treasury Secretary Timothy F. Geithner can look no further than Wall Street where the banks that received the biggest taxpayer bailouts are seeking to reap trading profits from securities rescued by the government.

Only months after it was started, the U.S. program designed to purge debts of no immediate discernible value from the balance sheets of troubled banks has helped transform the frozen debt into a money-maker as the bonds have rallied. Bank of America Corp. and Citigroup Inc., who received 22 percent of the $418.7 billion American taxpayers loaned to troubled financial institutions, boosted holdings on their trading books of home- loan bonds that lack government guarantees while investors were raising cash for the program, according to Federal Reserve data.

Charlotte, North Carolina-based Bank of America along with Citigroup, Morgan Stanley and Goldman Sachs Group Inc., all based in New York, added a combined $3.36 billion of the debt, for which there were few buyers as recently as March, to their short-term trading assets during the third quarter, up 16 percent from the second quarter, the most-recent data show.

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Prices of these securities may slump again, leaving the banks exposed to potential losses that the Treasury Department’s rescue plan was designed to mitigate, said Joshua Rosner, a managing director at New York-based Graham Fisher & Co., which advises regulators and institutional investors.

Speculative Trade

“It’s a trade that will likely work out, but it’s still a speculative trade, which is not what a taxpayer should want from firms that have only recently come out of critical care,” Rosner said.

The Public-Private Investment Program was introduced in March by Geithner as a means of helping struggling banks by reviving the market for unpackaged loans and mortgage securities that aren’t backed by government-supported institutions, such as Fannie Mae or Freddie Mac. Under the program, asset managers were supposed to raise money from investors and, with additional capital and loans from taxpayers, buy as much as $1 trillion in toxic assets from U.S. banks, freeing up money for lending.

It’s “absolutely ridiculous” that banks, which were expected to reduce their holding of such volatile mortgage securities, bought them before the government program was running and may now profit, said Michael Schlachter, managing director of Wilshire Associates, the Santa Monica, California- based investment-consulting firm. “Some of them created this mess, and they are making a killing undoing it.”

Scaling Back

Officials for Bank of America, Citigroup, Goldman Sachs and Morgan Stanley declined to comment on the Fed data, as did Treasury spokeswoman Meg Reilly.

Geithner, 48, scaled back PPIP as the Fed declined to provide additional financing and banks balked at selling non- agency mortgages at a loss. It wasn’t until July that the Treasury chose New York-based BlackRock Inc., Invesco Ltd. in Atlanta and seven other firms to start PPIP funds.

To date, funds participating in the program have raised about $6 billion of equity capital from private investors, which the government has matched. The Treasury also provided $12 billion of debt capital, bringing the funds’ purchasing power to $24 billion. Neither the Treasury nor the funds have disclosed how much and what debt has been bought.

Prices for some of the securities that the funds were supposed to buy have almost doubled since March. The rally was fueled in part by traders jumping in before PPIP funds could get off the ground, said Steve Kuhn, who helps oversee about $440 million of mortgage-bond investments for Pine River Capital Management LLC in Minnetonka, Minnesota.

Market Rally

“Anytime people know there’s a buyer coming, they position for that, and that’s clearly what happened here,” said Kuhn, who is co-manager of the Nisswa Fixed Income Fund.

The rally was boosted further by investors seeking riskier fixed-income assets to offset record low yields on Treasuries and by the stabilization of the housing market, he said.

Typical prices for the most-senior bonds backed by hybrid Alt-A mortgages stood at about 58 cents on the dollar by mid- December, up from lows of around 35 cents in mid-March, according to Barclays Capital data.

Prices rose as high as 60 cents on the dollar in November. Fixed-rate prime jumbo mortgage securities were at 84 cents, up from 63 cents in March.

Before the credit crisis, senior non-agency home-loan securities didn’t typically trade below 95 cents on the dollar, JPMorgan Chase & Co. data show.

Alt-A loans fall between prime and subprime in terms of projected defaults. Jumbo mortgages are larger than government- supported Fannie Mae and Freddie Mac are allowed to finance.

Non-Agency Debt

The Fed data on bank holdings of mortgage securities don’t distinguish between changes in value from buying or selling and those that result from rising or falling market prices. The higher values at Citigroup and Bank of America reflect in part purchases of non-agency debt, according to people familiar with each bank’s positions.

The value of non-agency debt designated by the four banks as held to maturity or available for sale fell a combined $2.9 billion to $70.8 billion in the third quarter from the previous three months. Under accounting rules, securities in these categories are usually held for longer than those designated as trading investments, helping to avoid writedowns. Debt available for sale can be sold more easily at a later stage than notes held to maturity.

Bank of America’s Wager

Bank of America, the largest U.S. bank by assets and deposits, added the most non-agency debt on its trading book in the third quarter, with an increase of $1.56 billion, or 73 percent, according to a Dec. 22 revision by the Fed of the company’s second-quarter data. The value of securities designated held-to-maturity or available-for-sale fell, by 1.7 percent to $37.3 billion.

The Charlotte, North Carolina-based firm, now led by Chief Executive Officer Brian Moynihan, reported $80 billion in writedowns and losses from the credit crisis, much of it related to defaulted home loans and bonds backed by them. The lender received $45 billion in federal bailout funds in October 2008 under the Treasury’s Troubled Asset Relief Program, which it repaid Dec. 9. The U.S. still holds warrants in the bank.

Without new purchases, bank holdings tracked by the Fed usually decline as the underlying loans are refinanced or default. That shrank the overall market by 5 percent in the third quarter and by 30 percent since its peak in mid-2007, separate Fed data show.

Citigroup’s holdings of non-agency residential mortgage bonds designated for trading rose by $421 million to $13.5 billion in the third quarter, the Fed data show. Other holdings fell $2.3 billion, or 6.9 percent, to $33 billion.

$117.8 Billion Loss

The New York-based bank was among the largest and earliest losers on toxic home-loan securities and has posted $117.8 billion of writedowns and credit losses. The U.S. injected $45 billion of taxpayer capital into the company and extended guarantees for $301 billion of its assets, including mortgage debt. Citigroup, led by CEO Vikram Pandit, agreed last month to pay back $20 billion and cancel the insurance. The U.S. owns 27 percent of the bank’s common shares.

At Goldman Sachs, CEO Lloyd Blankfein increased non-agency home mortgage bonds designated for trading by $593 million in the third quarter, to $2.71 billion, and Morgan Stanley’s jumped $785 million to $4.25 billion, the Fed data show. Goldman Sachs’s other holdings climbed $76 million to $449 million. Morgan Stanley, now overseen by CEO James Gorman, classified all its holdings as trading assets, according to the Fed data.

Free Money

Of the seven biggest owners of residential mortgage-backed securities, only San Francisco-based Wells Fargo & Co. reduced holdings of the debt on its trading book, by $130 million to $44 million. JPMorgan added $49 million to the trading book, while cutting its other holdings of the securities by $1.47 billion to $12.7 billion, according to the Fed data.

Eric Petroff, director of research at Wurts & Associates, a Seattle-based firm that advises institutions on $30 billion in investments, said it’s no surprise that banks added to their holdings following the unveiling of PPIP.

“Any time the government says, ‘We’re going to buy something in the securities market,’ they’re putting out a sign that says, ‘Free money, come and get it’,” he said.

The renewed interest by banks in holding the bonds has helped restore liquidity, said Scott Buchta, head of investment strategy at Guggenheim Securities LLC in Chicago. Higher prices have also eroded potential profits of PPIP funds and increased the risk of losses, making it harder for asset managers participating in the program to attract investors, he said.

Returns Shrink

Four of the nine PPIP managers missed the original Sept. 30 deadline for raising the minimum $500 million by more than a month. One manager, Marathon Asset Management, was allowed to make its initial closing after raising $400 million.

“If you were looking at returns in the high teens to low twenties in PPIP, now you’re looking at the low-to-mid teens,” said Joel Paula, senior analyst at Cambridge, Massachusetts- based NEPC LLC, which advised Connecticut’s state pension board on its decision to invest $200 million with three PPIP managers.

Higher prices are also slowing the pace at which PPIP managers can and want to buy, because they must be more careful when examining securities and their underlying collateral, NEPC’s Paula said.

“If you do your homework, you can still find value, but you’re not getting 20 percent for doing nothing anymore,” Paula said in an interview.

Locked In

While fundraising and investing is moving slowly, time could ultimately play to the PPIP investor’s advantage, said Alan Papier, of consulting firm Mercer, a unit of New York-based Marsh & McLennan Cos. Under PPIP’s terms, investors are locked in for eight years and managers have up to two years from their initial closings to invest the money, giving them time to wait for prices to drop.

“Managers are trying to figure out whether the rally in residential mortgage-backed securities is sustainable, or if there will be some sort of pullback,” Papier said.

Bill Eigen, manager of the $5.4 billion JPMorgan Strategic Income Opportunities Fund, said he bought residential mortgage- backed securities in the spring. Since then, he has sold and begun shorting both residential and commercial mortgage-backed securities, anticipating that their price would fall.

“This stuff was supposed to trade on fundamentals and will again trade on fundamentals,” he said in an interview. “PPIP is not going to fill up buildings.”



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