Citigroup Inc. resolved federal and state claims regarding the company's handling of residential mortgage-backed securities (RMBS) by settling with the U.S. Department of Justice for $7 billion.

According to the DOJ, Citigroup's conduct, including the "packaging, securitization, marketing, sale and issuance" of the RMBS prior to Jan. 1, 2009, had "serious" misrepresentations to the public and its investors, an accusation later acknowledged by Citigroup.

Attorney General Eric Holder, in a statement, said Citigroup's penalty is "historic" and part of the ongoing efforts of President Barack Obama's Financial Fraud Enforcement Task Force's RMBS Working Group, which helped recover $20 billion for U.S. consumers and investors.

"The bank's activities contributed mightily to the financial crisis that devastated our economy in 2008," Holder said. "Taken together, we believe the size and scope of this resolution goes beyond what could be considered the mere cost of doing business. Citi is not the first financial institution to be held accountable by this Justice Department, and it will certainly not be the last."

The DOJ stated Citigroup securitized and sold RMBS with "underlying" mortgage loans knowing it had "material defects." The Justice Department provided an internal email message from a Citigroup trader, stating, he "would not be surprised if half of these loans went down. ... It's amazing that some of these loans were closed at all." The attorney general said Citigroup's conduct, in addition to similar behavior by other banks, contributed to the financial crisis.

According to Associate Attorney General Tony West, Citigroup will pay the largest civil penalty in U.S. history and is responsible for providing consumer relief.

In a statement to Latin Post, Citigroup stated the DOJ agreement resolves "actual and potential" civil claims including from the Justice Department, several state attorney generals and the Federal Deposit Insurance Corporation. Of the $7 billion settlement, $4.5 billion will be paid to several federal and state civil claims. Citigroup will also pay $4 billion as a civil penalty to the DOJ under the FIRREA and $208.25 million on federal and state securities claims by the FDIC. Citigroup will also pay settlements to California, Delaware, Illinois, Massachusetts and New York.

"The comprehensive settlement announced today with the U.S. Department of Justice, state attorneys general, and the FDIC resolves all pending civil investigations related to our legacy RMBS and CDO (collateralized debt obligations) underwriting, structuring and issuance activities," Citigroup CEO Michael Corbat said. "We also have now resolved substantially all of our legacy RMBS and CDO litigation. We believe that this settlement is in the best interests of our shareholders, and allows us to move forward and to focus on the future, not the past."

"In addition to the principal reductions and loan modifications we've built into previous resolutions, this consumer relief menu includes new measures such as $200 million in typically hard-to-obtain financing that will facilitate the construction of affordable rental housing, bringing relief to families pushed into the rental market in the wake of the financial crisis."

An independent monitor will track Citigroup's settlement fees. The bank has until the end of 2018 to pay the $7 billion or risk paying liquidated damages to the nonprofit affordable housing and community development organization NeighborWorks America.

The DOJ noted the settlement does not resolve possible criminal charges for Citigroup or its employees. The announcement of the settlement comes as Citigroup reported revenues of $19.3 billion during the second quarter of 2014.

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