According to a Reuters report that references sources ‘familiar with the matter’, Citigroup (C) is close to buying itself out of trouble by paying the US Department of Justice [DOJ] about $7 billion to settle allegations the bank sold shoddy mortgages in the run-up to the financial crisis.
An announcement of the settlement between the bank and the DOJ could come as early as next week, the report said, noting that a majority of the settlement is expected to be in cash and that the figure also includes several billion dollars in relief to struggling mortgage holders.
That potential agreement marks a sharp reversal from mid-June, when the two sides were far apart in terms of pushing different amounts in settlement. The DOJ had been asking Citi for a $10 billion settlement while Citigroup had been holding out for $3 billion. The US Department of Justice had warned the New York-based bank that it planned to file a lawsuit unless the bank significantly raised its settlement offer.
Citi is among at least 8 banking institutions under investigation by the DOJ over the quality of home mortgages backing bonds sold to investors before and during the 2008 financial crisis.
JPMorgan Chase (JPM) agreed to pay $13 billion to settle charges over similar issues last November, and Bank of America (BAC) is reportedly in talks to pay as much as $17 billion to settle a similar case brought by the DOJ.
Citi shares closed down $0.56, or 1.17 percent, at $47.42 on the New York Stock Exchange on Tuesday.