April 30 (Bloomberg) -- Citigroup Inc., the third-biggest U.S. bank, was sued over $1.08 billion in securities allegedly backed by low-quality mortgages.
U.S. Bank, acting as trustee, sued Citigroup in federal court in Manhattan today over the securitization, called CMLTI 2007-AMC3, which was backed by 4,946 mortgage loans. U.S. Bank, which claims Citigroup breached its contract with buyers of the investment, is seeking unspecified damages and an order requiring Citigroup to repurchase the defective loans.
“Despite clear evidence of numerous breaches of representations and warranties with respect to the mortgage loans in the trust, Citigroup has failed, and continues to fail, to fulfill its promise to cure the breaches or repurchase those loans,” U.S. Bank said in its complaint.
The trustee claims the loans had a high default rate, resulting in more than $354 million in losses.
A forensic review of 1,604 of the mortgages underlying the 2007 investment found that at least 79 percent breached promises made by Citigroup in ways that made them worth less, U.S. Bank said in the complaint.
Danielle Romero-Apsilos, a spokeswoman for New York-based Citigroup, didn’t immediately return a phone message seeking comment on the suit.
The case is Citigroup Mortgage Loan Trust 2007-AMC3 v. Citigroup Global Markets Realty Corp., 13-cv-02843, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Bob Van Voris in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Michael Hytha at email@example.com