Latest enforcement action secures more than $17 million to Delaware from Citi;
Biden’s insistence on accountability for housing crisis has resulted in more than $130 million for Delaware in past three years;
Demands for accountability will continue
WILMINGTON – Delaware Attorney General Beau Biden announced Monday that Citigroup Inc. will pay at least $17 million to Delaware to settle allegations stemming from the bank’s conduct that helped cause the housing crisis.
The settlement with Citi is part of a multi-billion dollar settlement announced Monday between the bank, the United States Department of Justice, four other states and Delaware. The settlement resolves allegations centering on the bundling and sale of mortgages to investors. The investments – bought by pension funds, mutual funds and other investors – were much riskier than advertised. The resulting losses were disastrous for the economy.
This settlement is the latest result of Biden’s work to ensure there is accountability for those responsible for causing the steepest economic downturn since the Great Depression. Over the past three years, Biden has secured more than $130 million for Delaware from financial institutions in housing-related settlements.
“Our financial system only works when everyone plays by the rules,” Biden said. “The housing crisis was a manmade disaster that did not have to happen. The funds we have secured have helped thousands of Delaware families avoid foreclosure, strengthen communities hit hard by the housing crisis and reimburse taxpayers. Our work seeking accountability and helping Delaware homeowners is not finished.”
Delaware’s recovery comes in two parts. Citi will make a minimum of $10 million in direct relief available to Delaware homeowners in the form of credits similar to the 2012 National Mortgage Settlement (such as mortgage modifications and forgiveness of second mortgages). Citi will also pay the State $7.35 million. As with the recent JPMorgan settlement, these funds will be used to remediate the harm caused by Citi’s misconduct, including reimbursing government entities that suffered losses.
“Many neighborhoods in Delaware continue to suffer from the effects of the housing crisis,” Biden said. “Financial recoveries such as this one will give communities opportunities to thrive.”
The federal investigation was led by the U.S. Department of Justice’s Residential Mortgage-Backed Securities Working Group, under the leadership of Associate U.S. Attorney General Tony West.
“Associate Attorney General West’s leadership makes possible the joint federal-state law enforcement actions that hold accountable the financial institutions that broke the rules and helped cause the housing crisis,” said Biden, who is also a working group member.
Previous financial settlements that Biden’s office has secured with banks relating to their conduct that contributed to the housing crisis include:
- In February 2012, Biden, 48 of his colleagues and the federal government signed a $25 billion settlement with the nation’s five largest mortgage-servicing banks. That settlement brought $11.7 million to the State and has, so far, meant $75 million in financial benefits to 3,000 Delawareans. It also included important new protections for America’s military personnel that Biden fought to include;
- In November 2013, Biden secured $19 million from JP Morgan Chase to settle allegations that the bank misled investors about the risk level of mortgage-backed securities; and
- In December 2013, Biden announced that Ocwen Financial Corporation and its subsidiary, Ocwen Loan Servicing, will provide $7 million to Delaware borrowers, holding Ocwen accountable for past mortgage servicing and foreclosure abuses, providing relief to homeowners and stopping future fraud and abuse.
The Citi matter was handled for Delaware by Victoria Counihan, David Casler, and Owen Lefkon of the Attorney General’s Investor Protection Unit, and Matthew Lintner, Fraud Division Director.
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