Citi fined $158 million for gaming federal housing program

Citi fined $158 million for gaming federal housing program

NEW YORK (CNNMoney) -- Citigroup will pay $158 million to settle charges that its mortgage unit defrauded the Federal Housing Administration by inaccurately claiming that certain mortgages were eligible for government insurance, government officials announced Wednesday. Under the FHA's Direct

Endorsement Lender program, lenders like Citi's CitiMortgage division can submit certain loans for government insurance in case a borrower defaults. Lenders are required to maintain their own quality-control programs to ensure that loans submitted for such insurance have been prepared properly and without any evidence of fraud.

Citi, however, repeatedly obscured or downplayed problems with loans submitted for insurance over the past decade, the Manhattan U.S. Attorney's Office said Wednesday. The firm ignored roughly 1,000 cases of potential fraud and failed to verify information on borrowers' ability to make payments, according to the complaint in the case.Of the 30,000 mortgages Citi (C, Fortune 500) has endorsed for FHA insurance since 2004, more than 30% have defaulted, including 47% of those originated in 2006 and 2007. The government has already paid out nearly $200 million in claims on these loans, a "substantial percentage" of which should never have been eligible for insurance, the complaint says.

To view the full article please visit: http://money.cnn.com/2012/02/15/news/companies/citi_mortgage_settlement/index.htm

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