In conjunction with the national mortgage settlement reached on February 9th, Citi Mortgage has agreed to pay $158.4 million to resolve allegations that it falsely certified that mortgage loans issued by the bank met FHA insurance requirements.

According to the whistleblower who brought the case to the government’s attention, Sherry Hunt, many of Citigroup’s loans were riddled with altered tax forms, straw buyers, and borrowers who listed fictitious employers.  In spite of these defects, Citigroup continued to certify that such loans met FHA insurance requirements.  Hunt stated that she initiated her case after experiencing pressure from quality control managers to downplay defects and reduce the number of reported problems.  According to Hunt, the company would reward employees who had successfully challenged negative reviews by quality assurance workers.

According to the government, more than half the loans the bank originated from 2006 to 2007 have defaulted.  The Department of Housing and Urban Development has been forced to shell out nearly $200 million in insurance claims on mortgages Citigroup originated or underwrote since 2004.

Under the settlement, Citi Mortgage admitted that it “submitted to HUD-FHA certifications stating that certain loans were eligible for FHA mortgage insurance when in fact they were not” and that, as a result, FHA insured loans it otherwise would not have insured.

Read the entire articles, “Citi Mortgage Pays $158M in HUD Settlement”; “Citigroup Whistle-Blower Says Bank’s ‘Brute Force’ Hid Bad Loans”