NEW YORK ( TheStreet) -- Citigroup (C - Get Report) will pay Fannie Mae (FNMA) nearly $1 billion to resolve potential repurchase claims faulty mortgages sold to the housing giant between 2000 and 2012.
The bank said the $968 million settlement is mostly covered by existing mortgage repurchase reserves. Citi, which reports its second-quarter results on July 15, said it expects to add $245 million to its mortgage repurchase reserve to its second quarter, "which is generally consistent with its repurchase deal."
Shares of Citigroup were up 1.5% at $48.69 in early trading Monday.
The deal, which resolves repurchase claims on 3.7 million residential first mortgage loans, does not release Citi's liability with respect to servicing and other contractual obligations on the loans. It also does not release liability on over 12,000 loans issued over the same period that had certain characteristics, such as those loans sold with a performance guarantee or under a special credit enhancement program.The bank said it believes it is "adequately reserved" for the loans not covered by the agreement. "We have a strong and productive relationship with Fannie Mae. This agreement resolves substantially all potential future repurchase claims from them for loan originations from 2000 to 2012," Jane Fraser, CEO of Citi Mortgage said in a statement. Earlier this year, Bank of America (BAC - Get Report) entered into a $11.6 billion settlement with Fannie Mae, resolving a long-standing dispute over mortgages sold during the housing boom years. -- Written by Shanthi Bharatwaj New York. >Contact by Email. Follow @shavenk