SAN FRANCISCO - (Mealey's) Citibank NA on Friday settled a class
action suit alleging that it wrongfully suspended or decreased the value of
home equity lines of credit (HELOC), according to a document filed by the
plaintiffs in a California federal court (In re: Citibank HELOC
Reduction Litigation, No. 09-00350, N.D. Calif.).
The settlement is subject to the approval of U.S. Judge
Maxine M. Chesney of the Northern District of California.
A total dollar value of the settlement was not available,
but borrowers will each be entitled to recover $120 from Citibank to resolve
claims that their loans were devalued or canceled based on faulty calculations,
according to a motion for preliminary approval of class action settlement filed
by the plaintiffs.
According to the plaintiffs' second amended consolidated
complaint, Citibank sent letters to homeowners with outstanding HELOCs
notifying them that the value of the loans were being summarily reduced.
The calculations the bank used were based on "dubious automated valuation
models," according to the plaintiffs.
"These self-serving [automated valuation models] were specifically tailored to
serve Citibank's unlawful purpose of manufacturing a basis to decrease or
suspend homeowners' HELOC loans to protect Citibank's own financial interests
associated with the downside risk of the declining housing market and to get
rid of the low interest rate HELOC loans," the plaintiffs said in the
Under the terms of the settlement, Citibank agreed to
modify some of its home equity loan practices, including a guarantee not to
impose new standards on HELOCs that would hurt consumers. Additionally,
plaintiffs' counsel will receive approximately $1.2 million in fees and
According to the motion for approval of the settlement,
the parties have agreed to the certification of a settlement class defined as
"[a]ll persons in the United States from January 1, 2008 to January 31, 2012
whose Citibank HELOC Accounts were suspended or reduced based on a claim by
Citibank of Collateral Deterioration regarding the value of the property
securing the HELOC." The class representatives in the suit are David
Levin, Loren S. Siegel, Gary Cohen, Marie Cohen, Mark Winkler and Jennie
The plaintiffs are represented by Sean P. Reis in Rancho
Santa Margarita, Calif., and Jay Edelson,
Steven L. Woodrow and Evan Meyers in Chicago, all of Edelson McGuire, and James
Patterson of Patterson Law Group in San
Citibank is represented by Christopher Paul Murphy, Lisa
Walgenbach Cornehl and Steven Edward Rich in Los Angeles and Andrew S. Rosenman, Debra Lee
Bogo-Ernst and Lucia Nale in Chicago, all of Mayer Brown.
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