SDNY announces settlement of qui tam suit with mortgage arm of Citibank

by Ben Vernia | February 16th, 2012

On February 15, the U.S. Attorney’s Office for the Southern District of New York announced that Citimortgage, Inc., had agreed to pay $158.3 million to resolves claims initially brought by a whistleblower, that the company defrauded the Federal Housing Administration. According to DOJ’s press release, the company “admits, acknowledges, and accepts responsibility” for the misconduct:

By filing its Complaint, the Government joined a private whistleblower lawsuit that had
been filed against CITIMORTGAGE under the False Claims Act in August of last year. As part
of the settlement, CITIMORTGAGE has admitted, acknowledged, and accepted responsibility
for the following conduct:

  • CitiMortgage failed to comply fully with all HUD-FHA requirements with respect
    to certain loans.
  • CitiMortgage failed to conduct a full review of certain loans that it endorsed for
    FHA mortgage insurance pursuant to the DEL Program that experienced early
    payment defaults: i.e., became 60 days past due within the first six payments.
  • CitiMortgage endorsed for FHA mortgage insurance pursuant to the DEL
    Program certain loans that did not meet underwriting requirements contained in
    HUD’s handbooks and mortgagee letters, and therefore were not eligible for FHA
    mortgage insurance under the DEL Program.
  • As a result, CitiMortgage submitted to HUD-FHA certifications stating that
    certain loans were eligible for FHA mortgage insurance when in fact they were
    not; FHA insured certain loans endorsed by CitiMortgage that were not eligible
    for FHA mortgage insurance and that FHA would not otherwise have insured; and
    HUD consequently incurred losses when those CitiMortgage-endorsed loans
  • The SDNY did not announce how much of the recovery would be paid to the qui tam relator.

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