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Mortgage Investors Sue Citigroup Over Home Loan Underwriting Practices

NationalMortgageProfessional.com
Nov 05, 2010

Charles Schwab Corporation, the Federal Home Loan Bank of Chicago, the Federal Home Loan Bank of Indianapolis and Cambridge Place Investment Management have sued Citigroup over its home loan underwriting processes. Citigroup made the claims in a filing with the Securities & Exchange Commission (SEC) on Nov. 5. The suit claims that Citigroup funded sub-prime loans, repurchased and pooled them, and then sliced the pools into securities that could be resold to investors. The lawsuits against Citigroup allege that the bank failed to report important information regarding the securities. Charles Schwab Corporation, the Federal Home Loan Bank of Chicago, the Federal Home Loan Bank of Indianapolis and Cambridge Place Investment Management are seeking their money back and other damages. "The poor performance of the loans in these pools demonstrates that the originators departed extensively from their underwriting guidelines when making these loans," said a spokesperson from Charles Schwab. Hedge fund Cambridge Place is seeking to recoup approximately $1.2 billion it lost on sub-prime mortgages, naming Citigroup and other major banks, including Goldman Sachs, Morgan Stanley and JPMorgan Chase as having sold toxic pools.
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