False Claims Act Violations Will Cost CITIMORTGAGE, INC. $158.3 Million

CITIMORTGAGE, INC. will pay the U.S. government $158.3 million to settle charges under the False Claims Act as well as the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”). The federal government joined a lawsuit filed in 2010 by a private whistleblower under the qui tam provisions of the False Claims Act, which allow individuals who know or learn of fraud against the government to file suit on behalf of the government and to share in any recovery.

CITIMORTGAGE participated in the FHA’s Direct Endorsement Lender Program, but over a period of six years, the company failed to comply with all of the HUD-FHA requirements and improperly certified certain loans as eligible for FHA mortgage insurance when they were not eligible. Because of CITIMORTGAGE’s actions, HUD was fraudulently induced to insure unqualified loans, and when some of these improperly certified loans defaulted, HUD incurred significant losses.

U.S. Attorney Preet Bharara of Manhattan announced the settlement, in which CITIMORTGAGE has agreed to pay the United States government $158.3 million in damages under the False Claims Act.

The complaint against CITIMORTGAGE alleges that the company failed to disclose loans containing fraudulent representations and knowingly or recklessly submitted false loan certifications. In addition, its business units regularly applied pressure on the company’s quality control personnel to downplay defects it identified. This conflict between business and quality control employees undermined the integrity of CITIMORTGAGE’s quality control program. As a result of CITIMORTGAGE’s bad acts, the default rate on loans certified by the company in 2006 and 2007 climbed above 47 percent.

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