How Citi is hedging against the foreclosure settlements

Source: Fortune

Are you missing a $125,000 check?
Four hundred thousand checks mailed out as part of the government's foreclosure settlement with 13 banks have been returned to Rust Consulting, the firm that mailed them. Bryan Hubbard, an OCC spokesperson, says efforts are underway to track down better addresses for the recipients of these checks, some of which are worth up to $125,000.
Who's paying Rust to do this work? The 13 banks that agreed to the government settlement pay Rust, Hubbard told me. These banks include Bank of America (BAC), Citigroup (C), J.P. Morgan (JPM), Goldman Sachs (GS), Morgan Stanley (MS), and Wells Fargo (WFC), among others. Rust would not provide information for this article on how the contracts with the banks were negotiated or information on the terms of those contracts.
Rust's parent company is SourceHOV. Up until March, Apollo Global Management owned SourceHOV. Now, Citigroup, one of the 13 banks involved in the settlement, has that privilege. Citi Venture Capital International Private Equity (CVCI) "has an established track record of successful investments in the business services/outsourcing space; Source HOV fit nicely into our parameters," Citi spokesperson Danielle Romero-Apsilos wrote me in an email.
For Citigroup, the stake in SourceHOV is a hedge of sorts, though perhaps an unintentional one. When Rust gets bank settlement business, including settlements like the one involving Citi, it generates revenues for SourceHOV, the company Citigroup owns.
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