Citigroup to Pay $158.3M for ‘Reckless’ Mortgage Practices
Citigroup has agreed to pay $158.3 million to settle civil fraud charges that its CitiMortgage unit falsely endorsed nearly 30,000 mortgages for Federal Housing Administration insurance.
These mortgages contained “serious defects” and violated FHA underwriting standards, according to the civil complaint filed today along with the announcement of the settlement with the U.S. Attorney’s Office for the Southern District of New York.
Citigroup accepted responsibility for submitting mortgage certifications while “stating that certain loans were eligible for FHA mortgage insurance when in fact they were not,” reads the statement from the U.S. Attorney’s Office.
Operating under the Department of Housing and Urban Development (HUD), the FHA provides mortgage insurance on loans made by FHA-approved lenders throughout the United States. It also helps make homeownership affordable to first-time homebuyers and lower-income families.
The FHA’s insurance fund has been vastly depleted since the housing market collapse, raising concerns that the agency would require its own bailout by taxpayers.
For more than six years, CitiMortgage’s conduct resulted in the FHA incurring losses when certain loans defaulted that should never have been endorsed, authorities said.
“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,” said Preet Bharara, the United States attorney in Manhattan.
Since 2004, more than 30 percent of loans originated or underwritten by CitiMortgage have gone into default. CitiMortgage’s default rate soared to more than 47 percent for loans originated in 2006 and 2007, “resulting in foreclosures, evictions, and ultimately depressed real estate values, all to the detriment of the national housing market and the national economy,” reads the U.S. Attorney’s complaint.
Today’s announced settlement of $158.3 million is separate from the estimated $2.2 billion Citigroup has to pay in connection with the $25 billion mortgage loan settlement announced last week by the Justice Department and the nation’s top five mortgage lenders.
