Trustees Seek More Time on Citigroup Settlement

Citigroup Inc.'s $1.13 billion mortgage-securities settlement with private investors may not be wrapped up for a few more months.

The trustees involved in the settlement, which include units of Deutsche Bank AG, HSBC Holdings PLC and U.S. Bancorp, have asked for another extension as they decide whether to approve the deal.

In a notice dated Friday, the trustees said they were still waiting for the opinions of "expert advisors" on the proposed settlement as it relates to each of the 68 mortgage-securities trusts involved in the agreement. The trustees said they want to review those evaluations, combined with any "valid directions" from investors.

The April settlement between Citigroup and investors represented by Houston law firm Gibbs & Bruns originally gave the trustees a deadline of June 30, with the option to extend to Aug. 14. The trustees said in the Friday notice that Citigroup has now granted them a deadline of Oct. 31.

The settlement was meant to put to rest the complaints of 18 institutional investors who said Citigroup had misled them about the quality of the mortgage securities they bought from the bank.

The trustees have reason to be cautious. In June, an investor group led by BlackRock Inc. and Pacific Investment Management Co. sued a group of trustees--including Deutsche Bank, HSBC and U.S. Bancorp--claiming they ignored "pervasive" signs of bad mortgages in securities they'd bought. Deutsche Bank declined to comment, while representatives for HSBC and U.S. Bancorp didn't have an immediate comment.

The trustees serve as administrators for investors in a structured deal such as a mortgage-backed security, but investors have argued that the trustees also have a fiduciary duty to their investors.

BlackRock and Pimco are both among the investors in the Citigroup settlement. A Citigroup spokeswoman declined to comment.

The process highlights the complications banks face as they wade through crisis-era litigation, even after initial agreements are reached.

J.P. Morgan Chase & Co. announced a $4.5 billion settlement in November with private investors, but it wasn't until Friday that the trustees representing those investors agreed to accept parts of that settlement. Those trustees are still reviewing some of the mortgage-securities trusts that are supposed to be included in that settlement, accepting some and rejecting others, according to a J.P. Morgan filing on Monday.

A settlement that Bank of America Corp. brokered with private investors, over mortgage securities, took longer. The bank agreed in 2011 to pay $8.5 billion to mortgage-securities investors, with Bank of New York Mellon Corp. acting as trustee. But some investors, led by American International Group Inc., pushed back, saying that Bank of New York should have lobbied for a better deal. It wasn't until last month that AIG agreed to drop its protests.

The investors in the settlements with Citigroup, J.P. Morgan and Bank of America all have been represented by Gibbs & Bruns.

Al Yoon contributed to this article

Write to Christina Rexrode at [e-mail]

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