Updated 1 year ago
NEW YORK (AP) - Citigroup has agreed to pay $158.3 million to settle claims that its mortgage unit duped the U.S. government into insuring risky mortgage loans for over six years.
The government said Wednesday that Citi Mortgage certified 30,000 mortgages for insurance provided by the Federal Housing Agency and submitted many certifications that were "knowingly or recklessly false."
More than a third of those mortgage loans went into default, resulting in millions of dollars in losses for the government because of the insurance claims.
"For far too long, lenders treated (the government) insurance of their mortgages like they were playing with house money," Manhattan U.S. Attorney Preet Bharara said.
As part of the civil fraud settlement, Citi accepted responsibility for failing to comply with government requirements and submitting certifications that were fraudulent.
Wednesday's payments are in addition to the $1.8 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 mortgage lenders.
Since 2004, more than 30 percent of loans originated or underwritten by Citi Mortgage have gone into default. The U.S. Department of Housing and Urban Development said Citi Mortgage's default rate soared to over 47 percent on loans that were 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.
CitiMortgage submitted certifications to the government which stated that certain loans were eligible for FHA mortgage insurance when in fact they were not, according to the government. As a result, the government insured mortgages it would not otherwise have. The defaulted loans resulted in millions of dollars in insurance claims.
Citi said in a statement that the company will not take any additional charge related to this settlement. The bank also said the government-related business is important and that it will continue to participate in the government's loan and insurance programs, and that it has worked on improving the quality of its processes.
(Copyright 2012 The Associated Press. All rights reserved.)