How Citibank Dumped Lousy Mortgages on the Government

How Citibank Dumped Lousy Mortgages on the Government

by Cora Currier ProPublica

Citigroup agreed yesterday to pay $158 million to settle a lawsuit over bad loans that the bank passed on to the Federal Housing Administration to insure. The whistle-blower who originally brought the case, Sherry Hunt, an employee of Citi’s mortgage department, said the company actively undermined the process that was supposed to check for fraud in order to push through reckless loans and get higher profits.

The suit itself makes for good reading. We’ve pulled out the juiciest bits, and explain just what Citi appears to have been doing.

Some background: The FHA insures one-third of the mortgages loans in the country, taking on the risk of homeowners’ default from lenders like Citi. The government requires lenders to certify that insured loans meet FHA standards.

Citi appears to have flouted those standards. According to the lawsuit, the bank passed along subpar loans to the FHA until very recently, making “substantial profits through the sale and/or securitization of FHA-backed insured mortgages” while “it wrongfully endorsed mortgages that were not eligible.”

In the settlement, Citi, which was bailed out by taxpayers in 2008 to the tune of $45 billion, “admits, acknowledges, and accepts responsibility” for passing on bad loans.

The suit’s allegations

Citi was passing on mortgages with particularly high rates of default to the FHA, costing taxpayers millions in insurance claims:

The quality control unit in charge of reviewing the mortgages had “marching orders” to pass questionable loans by “brute force”:

The company started basing compensation for some employees on how many loans got through quality control, intensifying the pressure:

In January 2011, Citi gave awards to employees who had successfully challenged quality control ratings. In a detailed Bloomberg News story, the whistle-blower, Hunt, said that at the awards ceremony, quality control workers “were humiliated in front of everyone“:

Lenders are supposed to self-report to the government when they discover fraudulent or shoddy loans. But Citi almost never did:

At one point, Citi erased the records of nearly 1,000 potentially fraudulent loans:

Citi’s settlement

The company admits to passing on loans that were “not eligible” for government guarantees:

Citi has to pay $158.3 million within 30 days. Of that sum, $30 million will go to the whistle-blower. The suit was filed under the False Claims Act, which rewards whistle-blowers who bring cases resulting in settlements in which it was alleged that the government was defrauded:

The government has reserved the right to pursue criminal charges:

A spokesman for Citigroup said in an emailed statement: “We take our quality assurance processes seriously and have pro-actively undertaken process improvements to ensure that they are as robust as possible. Our government-related business is very important to us, and we will continue as a participant in the FHA’s Direct Endorsement Lender Program with the full support of HUD.”

Citi isn’t the only bank facing these kinds of allegations 2014 as part of last week’s mortgage settlement, Bank of America will pay the FHA up to $1 billion for fraud and abusive foreclosure practices.

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4closureFraud.org

Comments
4 Responses to “How Citibank Dumped Lousy Mortgages on the Government”
  1. Mad as Hell in Maryland says:

    The real question is WHEN are they (Our Gov’t) going to start with CRIMINAL investigations? WHEN are they going to Publicly Acknowledge that most loans closed in 2006-2008 do NOT have perfected liens? WHEN are they actually going to help the common citizen?
    NEEDS TO HAPPEN SOON!

    Fight the good fight! Be well! Challenge Everything!

    • Mad as Hell in Maryland says:

      Forgot to mention;

      The ‘Settlement’ with Regard to the Big ’5′ Banks, and the 50 States AG’s, / US Govt, is actually A SHELL GAME! They give those who WERE foreclosed upon improperly and out of their homes $2K to release them from Liability. (I guarantee the checks will have a release of liability in small print on it.) They say they will give a principal reduction (albeit small one) to those who have paid on time, well, what do you have to give up for that reduction? Answer- They will re-do documents to perfect lien’s, and you will give up your rights to sue.
      This is one big scam on the American People. I for 1 will NOT be going with this settlement, and will pursue legal action independently!
      JUST ANOTHER SHAM/SCAM! Time to Stand Up and Be Heard People!

      Fight the Good Fight! Challenge Everything! Be Well!

  2. lvent says:

    THIS MASSIVE DERIVATIVES FRAUD BY THE FEDERAL RESERVE DEBT CARTEL WAS NOT UNKNOWN TO THE U.S. GOVERNMENT..CONGRESS CREATED AND INSTITUTED THIS EVIL CRIMINAL ELITE PLAN….THEY ARE TRAITORS TO THEIR FELLOW MAN AND THEIR COUNTRY…AND NOW THE U.S. GOVERNMENT ARE INDUCING SNEAKY FASCIST TACTICS ON THE AMERICAN PEOPLE TO COVER UP FOR …THIS MASSIVE $1.2 QUADRILLION IN DERIVATIVES FRAUD …….IT IS NOT THE DEBT OF THE AMERICAN PEOPLE …THIS MASSIVE FRAUD IS HIDDEN IN THE CRIMINAL ELITES SHADOW BANK……..AND IT IS THE AMERICAN PEOPLE WHO WERE INTENTIONALLY, MASSIVELY AND CRIMINALLY DECEIVED BY TRAITORS FROM WITHIN…AND NONE OF THIS MASSIVE FRAUD THAT WAS BEING COMMITTED IN OUR NAMES WAS KNOWN TO THE AMERICAN PEOPLE WHO WERE DECEIVED INTO NOT ONLY FUNDING AND THEREFORE PAYING FOR THIS CRIMINAL ELITE MASSIVE PONZI SCHEME SWINDLE AND HEIST OF ALL OF OUR WEALTH, AND LIVELIHOODS….. BUT DECEIVED INTO PAYING FOR OUR OWN SET UP TO FAIL AND OUR OWN ROBBERY……OF EVERYTHING THAT WE OWN…AND WORKED FOR OUR ENTIRE LIVES…AND THIS ROBBERY IS STILL GOING ON UP TO THIS MINUTE…..AND IS BEING DECEPTIVELY HIDDEN FROM MOST BY THE USE OF MORE LIES….DECEPTION …AND FRAUD BEING COMMITTED AND ALLOWED BY THESE VERY SAME CRIMINAL ELITE AND THEIR TRAITOR POLITICIAN FRIENDS…..!!!! THERE IS NO LEGAL OR MONETARY FIX FOR THEIR MASSIVE INSUSTAINABLE DEBT FRAUD…..!!!! THE COURTS ARE WELL SETTLED IN AMERICA THAT…….FRAUD VITIATES EVERYTHING…!!!!! OFF WITH THEIR HEADS….!!!

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