Citigroup Agrees to Pay $158M for Misleading Mortgages

In another setback for the bank, Citigroup will have to pay $158.3 million over claims that it had misled the government into insuring risky mortgage loans over a six-year time span, resulting in millions of dollars in government losses.

The announcement comes on the heels of a $25 billion settlement last week that will require major banks — including Citigroup — to settle allegations of foreclosure abuses. Citigroup’s share of the bill will be about $2.2 billion from that settlement alone.

But the latest $158 million tab from the Justice Department stems from a separate case, in which the government accused Citi of providing misleading information about the quality of some 30,000 mortgages to a federal insurance program operated by the U.S. Department of Housing and Urban Development. More than a third of those mortgages wound up in default, resulting in major losses to the government.

Citi has accepted responsibility for failing to comply with government requirements regarding the insurance of the mortgages.

CitiMortgage has faced a high default of its loans. Since 2004, more than 30 percent of loans originated or underwritten by CitiMortgage have ended up in default, the Associated Press reports. In 2006 and 2007, the default rate even swelled to more than 47 percent.

Source: “Citigroup to Pay $158 Million in Mortgage Fraud Settlement,” Associated Press (Feb. 15, 2012) and "Citi Admits Mortgage Fraud in $158-Million Settlement,” Los Angeles Times (Feb. 15, 2012)