Citigroup To Pay Out $158 Million Settlement For Mortgage Fraud
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Citigroup Inc, the third largest bank in the US, has agreed to pay the US government over $158.3 million to settle an investigation into its mortgage practices, after admitting that it had fraudulently misled the government into insuring risky mortgage loans.
The lawsuit had come after a CitiMortgage employee from Missouri had blown the whistle on 30,000 mortgages certified for insurance by CitiMortgage, which were “knowingly or reckless false.”
Citigroup Inc, the third largest bank in the US, has agreed to pay the US government over $158.3 million to settle an investigation into its mortgage practices, after admitting that it had fraudulently misled the government into insuring risky mortgage loans.
The lawsuit had come after a CitiMortgage employee from Missouri had blown the whistle on 30,000 mortgages certified for insurance by CitiMortgage, which were “knowingly or reckless false.”
In the settlement papers filed in a US District Court in New York, CitiMortgage “admitted, acknowledged and accepted responsibility” for misleading the government – an action, which investigators say, have lasted for more than six years.
[quote]“Not only has Citi’s misconduct cost the United States millions of dollars in insurance claims, with additional losses expected in the future, but also it has led to mortgage defaults and home evictions and foreclosures across the country,” alleged prosecutors in the complaint filed, as cited by the Financial Times.[/quote]“For far too long, lenders treated HUD’s (US Department of Housing and Urban Development) insurance of their mortgages like they were playing with house money,” added US Attorney Preet Bharara, as quoted by Bloomberg.
[quote]“In fact, they were playing with other people’s money and other people’s homes.”[/quote]According to a spokesman for Citigroup on Wednesday, the company was pleased to have been have able to settle the case, adding that it had already set aside enough money – from the fourth-quarter last year – to cover the payout.
“We take our quality assurance processes seriously and have pro-actively undertaken process improvements to ensure that they are as robust as possible,” claimed Citigroup spokesman Mark Rodgers.
This is not the first settlement that Citigroup has had to make in recent months, with the company having agreed to pay as much as $2.2 billion last week over charges on foreclosure abuses.
Related: Citigroup Pays US$285 Million To Settle Fraud Charges
Related: US To Sue Banks Over Subprime Mortgage Loans
In each of the complaints, the company was said to have systematically ignored the rules set by US authorities; and more troublingly, employees had also been accused of asking members of the compliance department to not report any problems to the government.
The whistleblower in this case is likely to receive up to 25 percent of the settlement reached with the government, depending on how much work she contributed. Sherry Hunt, a quality control manager at CitiMortgage, and her lawyer, Finley Gibbs, has thus far declined to response to requests for comment.
