Politics & MoneyMortgage

Federal Reserve fines Citigroup $8.6 million for mortgage document issues

Employees allegedly signed documents without knowing what was in them

A major U.S. bank is being fined over sloppy mortgage documentation practices and no, it’s not Wells Fargo.

The Federal Reserve announced Friday that it fined CitiGroup $8.6 million over the “deficient execution and notarization of certain mortgage-related affidavits” by its subsidiary CitiFinancial.

The issue stems from Citi’s exit from the mortgage servicing business back in 2017.

In a release, the Fed alleges that January 2015 through August 2015, Citi mishandled mortgage and notarization documents.

Here, from the consent order, is what Citi is alleged to have done:

Mortgage-related affidavits were executed by CitiFinancial employees making assertions regarding the ownership of the mortgage note (“Lost Note Affidavits”) 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 Lost Note Affidavits were not properly notarized as they were not signed or affirmed in the presence of a notary.

In layman’s terms, CitiFinancial employees were signing legal mortgage-related documents without knowing the contents of said paperwork.

Does this sound familiar? Well it should, this type of activity led to the “robo-signing” issue that plagued the foreclosure crisis.

The consent order notes that CitiFinancial states that the Lost Note Affidavits that may have been impacted by the conduct described in the order were replaced by CitiFinancial with properly executed and notarized affidavits before being used to make assertions regarding the ownership of lost mortgage notes.

Citi also states, in the consent order that it has taken steps to address the deficiencies that were the cause of the fine, as well as replaced the affidavits that were potentially impacted with properly executed and notarized affidavits.

Notably, while bank employees were practicing “unsafe” or “unsound” banking practices, the bank was under a 2011 consent order from the Federal Reserve.

This order was put in place to ensure the bank took specific steps to address deficiencies related to mortgage servicing.

Nevertheless, the company corrected its mistakes by replacing, where necessary, the affidavits potentially impacted by erroneous handling and successfully exited the servicing business in 2017.

In January of last year, CitiMortgage announced an agreement to a servicing rights deal with New Residential Investment and Nationstar Mortgage that aimed to transfer the servicing rights for approximately 780,000 mortgages away from CitiMortgage.

In addition to selling the mortgage servicing rights on approximately $97 billion in unpaid principal balance to New Residential, Citi entered a separate subservicing agreement with Cenlar to end its mortgage servicing business.

The Fed also announced it terminated the enforcement action from 2011, as the company has since shown considerable improvement.

HousingWire contacted Citi for comment and this article will be updated should it respond.

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