The civil suit was filed by Sherry Hunt, a CitiMortgage employee in Missouri while the settlement was approved by the US Southern District Judge.
The home loan unit of Citigroup accepted that it failed to adhere with underwriting requirements of the Federal Housing Administration insurance plan, which was administered by the US Department of Housing and Urban Development.
CitiMortgage violated the standard law and submitted loans to such plans which it certified as eligible even though they weren’t, consequently the government sustained losses when those loans defaulted, said the complaint.
HUD paid nearly $200m in insurance claims on loans, CitiMortgage originated or underwrote since 2004, which were ineligible for FHA insurance and should not have been insured.
Manhattan US Attorney Preet Bharara said that lenders treated HUD’s insurance of their mortgages like they were playing with house money. In fact, they were playing with other’s money and homes.
"Citimortgage is the latest in a series of cases this office has filed against lenders who flouted HUD requirements for making government-backed loans. We are pleased that, with today’s settlement, Citimortgage has accepted responsibility for its conduct and agreed to pay damages in an amount that will significantly compensate HUD in this case for losses to the FHA insurance fund," Bharara added.
