FINRA Fines Citigroup $3.5 Million for Inaccurate RMBS Data – NMP Skip to main content

FINRA Fines Citigroup $3.5 Million for Inaccurate RMBS Data

May 25, 2012

The Financial Industry Regulatory Authority (FINRA) has announced that it has fined Citigroup Global Markets Inc. $3.5 million for providing inaccurate mortgage performance information, supervisory failures and other violations in connection with sub-prime residential mortgage-backed securitizations (RMBS). Issuers of RMBS are required to disclose historical performance information for past securitizations that contain mortgage loans similar to those in the RMBS being offered to investors. Historical data on mortgage performance is material to investors in assessing the value of RMBS and in determining whether future returns may be disrupted by mortgage holders' failures to make loan payments. "Citigroup posted data for its RMBS deals that it should have known was inaccurate; and even after they learned that the data was inaccurate, Citigroup did not correct the problem until years later," said Brad Bennett, FINRA executive vice president and chief of enforcement. "Investors use this data to inform their decisions and in this case, for over six years, investors potentially used faulty data to assess the value of the RMBS." FINRA found that from January 2006-October 2007, Citigroup posted inaccurate mortgage performance data on its Web site, where it remained until early May 2012, even though the firm lacked a reasonable basis to believe that this data was accurate. On multiple occasions, Citigroup was informed that the information posted was inaccurate yet failed to correct the data until May 2012. For three sub-prime or Alt-A securitizations, the firm provided inaccurate mortgage performance data that may have affected investors' assessment of subsequent RMBS. In addition, Citigroup failed to supervise mortgage-backed securities pricing because it lacked procedures to verify the pricing of these securities and did not sufficiently document the steps taken to assess the reasonableness of traders' prices. Also, Citigroup failed to maintain required books and records. In certain instances, when it re-priced mortgage-backed securities following a margin call, Citigroup failed to maintain a record of the original margin call, document the supervisory approval or demonstrate that the revised price was applied to the same position throughout the firm. In settling this matter, Citigroup neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
About the author
Published
May 25, 2012
California Approves $25B Homebuyer Loan Program, Targeting New Construction

Proposition 37 could open new purchase lending opportunities, but financing costs and borrower qualification will determine its reach

When AI Takes Action: New Federal Framework Raises Questions

New federal banking guidance examines the risks of autonomous AI, from borrower communications to servicing transactions, with a focus on human oversight and accountability

States Tighten Mortgage Rules For Home Equity Investments

Massachusetts, Maine, and Illinois are expanding oversight of home equity financing

West Capital LO Challenges Contractor Status, Required Fees

A former originator alleges unpaid overtime, recurring tech charges, and company restrictions that he says undermine his independent-contractor status

CFPB Closes 40% Of Investigations, Keeps Mortgage Enforcement In Focus

The federal watchdog closed thousands of supervisory and investigative matters as it narrowed oversight

Midterms Loom With Mortgage Policy Changes Already In Motion

As voters head to the polls Tuesday, Washington is weighing changes to refinancing costs, loan pricing, and lending regulations