Citi to pay $7B mortgage settlement

Citigroup agreed to pay $7 billion to settle charges that it packaged bad mortgages during the run-up to the financial crisis.

It includes $4 billion in penalties, $2.5 billion in mortgage modifications and other relief to homeowners, and $500 million going to five states and the Federal Deposit Insurance Corp.

The settlement means Citi will be able to avoid a civil suit by the Justice Department and mirrors similar agreements with JPMorgan Chase (JPM) and other lenders in recent years.

While Citi took a $3.8 billion hit because of the deal, which essentially wiped out its earnings for the quarter, it can afford it. Last year, the bank earned $14 billion and had $35 billion of cash on its balance sheet as of June 30.

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