Citi Inks $7 Billion Mortgage Settlement

By CNN

Published 07/14 2014 07:17AM

Updated 07/14 2014 07:19AM

NEW YORK (CNNMoney) -- Citigroup agreed to pay $7 billion to settle charges that it packaged bad mortgages during the run-up to the financial crisis.

The deal includes $4 billion in penalties, $2.5 billion in mortgage modifications and other relief to homeowners, and $500 million going to a number of states and the Federal Deposit Insurance Corp.

The settlement helps Citi avert a civil suit by the Justice Department and mirrors similar agreements with JPMorgan Chase and other lenders in recent years.

The amount is far more than the $363 million initial offer from Cit but less than the $12 billion initially sought by Justice, according to a source familiar with the deal. The breakthrough in the talks occurred after Justice Department lawyers notified the bank that they were prepared to file a lawsuit against the bank.

Citi's agreement is about half the $13 billion JPMorgan Chase agreed to pay last November, and is also smaller than a $9.5 billion settlement that Bank of America reached in March with the regulator of government-controlled mortgage lenders Fannie Mae and Freddie Mac.

Bank of America remains in talks with the Justice Department on a separate mortgage settlement with that agency, but government lawyers and the bank remain billions of dollars apart.

Copyright 2015 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.