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On Wednesday, Citigroup Inc. (C - Analyst Report) announced a settlement with Freddie Mac (FMCC) worth about $395 million. The settlement includes the resolution of all outstanding and potential repurchase claims relating to misrepresentations of loans originated and sold directly to Freddie Mac by Citigroup from 2000 to 2012.

The settlement amount will be paid from Citigroup’s current reserves. In the lawsuit, Freddie Mac accused the banking major of misrepresenting risky mortgage-backed securities (MBS) worth about $3.7 million.

Prior to this settlement, in Jul 2013, Citigroup announced the settlement of a lawsuit filed by Fannie Mae (FNMA) related to the similar issue. The company shelled out a sum of $968 million to Fannie Mae for the settlement.

In May this year, Citigroup also settled a lawsuit filed by the Federal Housing Finance Agency (FHFA), accusing it of misrepresenting MBS. FHFA had accused Citigroup of deceiving Fannie Mae and Freddie Mac into buying MBS worth $3.5 billion.

Such moves by Citigroup demonstrate the company’s aim to resolve all mortgage related issues, thereby reducing costs over the upcoming period. Moreover, such settlements are anticipated to aid in the further revival of the economy. Alongside, these strategic decisions are expected to bode well for Citigroup and help it gain investors’ confidence. Citigroup currently carries a Zacks Rank #4 (Sell)

Citigroup is the second bank after Bank of America Corporation (BAC - Analyst Report) to arrive at a settlement. BofA announced an agreement with Fannie Mae worth about $10.3 billion in Jan 2013. It included the resolution of all outstanding and potential repurchase, along with other claims relating to all major residential mortgage loans originated and sold directly to Fannie Mae by BofA from Jan 1, 2000 through Dec 31, 2008.

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