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From Banking and Finance Law Daily, August 10, 2018

Fed fines Citigroup $8.6M for mortgage servicing deficiencies

By Lisa M. Goolik, J.D.

The Federal Reserve Board has fined Citigroup $8.6 million for the improper execution of residential mortgage-related documents while subject to a 2011 consent order requiring the financial institution and its subsidiary, CitiFinancial, to specifically address deficiencies relating to mortgage servicing. According to the latest consent order, the practices occurred in 2015 and have since been corrected. In addition, based on evidence of "sustainable improvements," the Fed announced that it will terminate the enforcement action from 2011 against Citigroup and CitiFinancial related to residential mortgage loan servicing.

Improperly executed affidavits. In 2010, a review of major residential mortgage servicers by the federal banking agencies raised concerns that Citigroup had not adequately assessed the risks associated with residential mortgage loan servicing, foreclosure activities, and related functions. As a result, in 2011, the Fed issued a consent order against Citigroup and CitiFinancial relating to mortgage servicing and requiring Citigroup and CitiFinancial to take specific measures to address deficiencies relating to mortgage servicing.

In connection with its exit of the mortgage servicing business of CitiFinancial, Citigroup subsequently identified and reported evidence that, from January 2015 through August 2015:

  • mortgage-related affidavits were executed by CitiFinancial employees making assertions regarding the ownership of the mortgage note in which the affiant represented that the assertions in the affidavit were based on personal knowledge or based on a review by the affiant of the relevant books and records, when, in certain cases, the signer was not in a position to have personal knowledge or review the relevant books and records; and
  • the affidavits were not properly notarized as they were not signed or affirmed in the presence of a notary.

Those practices, according to the Fed, constituted unsafe or unsound banking practices within the meaning of Section 8 of the Federal Deposit Insurance Act.

Deficiencies remediated. The Fed noted, however, that Citigroup and CitiFinancial have since taken steps to address the deficiencies that were the subject of the most recent consent order. In addition, CitiFinancial stated that any improperly executed affidavits were replaced with properly executed and notarized affidavits before being used to make assertions regarding the ownership of lost mortgage notes, in court, or otherwise.

Citigroup exited the mortgage servicing business in 2017.

Companies: CitiFinancial; Citigroup

MainStory: TopStory EnforcementActions FederalReserveSystem Loans Mortgages

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