Citigroup, Inc (NYSE: C) Must Defend Suit over Loan Documents, Court Says

Citigroup, Inc (NYSE: C)’s CitiFinancial Mortgage must defend a suit over issues related to loan documents, ruled a federal appeals court.

The suit is only a small part of a larger controversy related to the quality of legal filings on foreclosure documentations. Ally Financial, JPMorgan Chase & Co. (NYSE: JPM) and Bank of America Corp (NYSE: BAC) have all suspended mortgage foreclosures and evictions as allegations have been brought forth about poor loan documentation in foreclosure cases. Citigroup, Inc (NYSE: C) and Wells Fargo & Co. (NYSE: WFC) have not announced any similar actions.

The case, decided by the 7th Circuit U.S. Court of Appeals, involved tow investors that purchased a mortgage in Illinois from CitiFinancial for $140,000 in 2001. Investors said that they never received a copy of the underlying note, making it so that investors could never foreclose in the property. Investors Patrick Cogswell and Patrick O’Flaherty sued CitiFinancial as a result.

The appeals court reversed a lower court ruling and said that the case could be decided in a trial.

“It just illuminates an existing problem that I think a lot of these financial institutions may be confronted with in the future,” said Vincent Mancini, an attorney for O’Flaherty and Cogswell,

Citigroup Inc. (Citigroup) is a global diversified financial services holding company. The Company provides consumers, corporations, governments and institutions with a range of financial products and services. As of December 31, 2009, Citigroup had approximately 200 million customer accounts and did business in more than 140 countries. Citigroup operates through two primary business segments: Citicorp, consisting of its Regional Consumer Banking (RCB) businesses and Institutional Clients Group (ICG), and Citi Holdings, consisting of its Brokerage and Asset Management (BAM), Local Consumer Lending (LCL), and Special Asset Pool (SAP). In April 2010, Barclays PLC acquired Italian credit card business of Citibank International Bank plc. In May 2010, the Company announced the creation of a new Collateral Management Services unit within its Securities and Fund Services business.

Shares of Citigroup, Inc (NYSE: C) traded down 0.73% during mid-day trading on Monday.