As a major financial services provider, Citigroup (C) has exposure on many fronts. To be specific, it has come under more scrutiny over the financial crisis of late, and now is subject to exposure based on decisions it made prior to the crisis. Ironically, it is also involved in purchasing the same type of assets from the government as it is being brought to task for selling to consumers during the run up to the crisis. Mortgage-backed securities are showing their good and bad side to Citigroup.

On the good side, mortgage-backed securities, the same ones that tanked during the crisis, are now outperforming the market due partly to the high interest rates on many of these mortgages and partly to the low interest rate in the economy. Citigroup just recently purchased $1.67 billion worth of mortgage-backed securities from the United States. These securities were inherited by the government through a bailout, and now the government wants out.

These mortgage-backed securities have seen high demand as many believe the housing market is beginning to stabilize. Thus, they are significantly less risky today than they were the last time the government sold them. Citigroup was among six other investors interested in buying this portfolio.

However, there is another side to this. First, among lawsuits is South Korean Woori Bank, which is now suing Citigroup over mortgage-backed securities and other CDOs that it was sold. According to Woori Bank, Citigroup purposely sold it toxic CDOs in order to move them from its balance sheet to Woori’s.To continue reading, click here.