Citigroup Inc. To Pay $158 Million To Settle Mortgage Lending Lawsuit

NEW YORK - (Mealey's) Citigroup Inc. on Feb. 15 agreed to pay $158.3 million to resolve a lawsuit brought by the federal government accusing the bank of failing to comply with Housing and Urban Development and Federal Housing Administration regulations when approving residential mortgage loans (United States ex rel. Sherry A. Hunt v. Citigroup Inc., et al., No. 11-cv-5743, S.D. N.Y.). 

(Settlement order.  Document #85-120224-015R.)


U.S. Judge Victor Marrero of the Southern District of New York signed the settlement order in which Citigroup, Citibank N.A. and CitiMortgage Inc. admitted that CitiMortgage wrongfully sent certifications to HUD and the FHA stating that loans were eligible for FHA mortgage insurance, even though they were not. 

The government initially sued Citigroup in August, alleging that CitiMortgage was not complying with the requirements of the FHA's Direct Endorsement Lender Program, which allowed the company to originate, underwrite and endorse mortgages for FHA insurance.  If the borrower defaulted on the loan, HUD was responsible, thereby costing the agency millions of dollars, the government says.  According to the government's lawsuit, more than 30 percent of the loans CitiMortgage approved for FHA insurance since 2004 have gone into default.  The government also says in its complaint that CitiMortgage pressured quality control employees to ignore defects in loans that were approved for FHA insurance.  

The government's action was later consolidated with a whistle-blower suit brought under the False Claims Act by Sherry A. Hunt.  

Theodore V. Wells Jr., Brad S. Karp and Joyce S. Huang of Paul Weiss Rifkind Wharton & Garrison in New York are counsel for the defendants. 

U.S. Attorney for the Southern District of New York Preet Bharara and Robert William Yalen, Joseph N. Cordaro and Jamie L. Nawaday of the U.S. Attorney's Office in New York represent the government. 

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