Citigroup to Pay $158M Over Bad Loans

April 13, 2012 

On February 16, 2012, Citigroup agreed 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.

Of the $158 million in the settlement, Hunt will receive $30 million. Under the False Claims Act, whistle-blowers are rewarded for bringing in cases resulting in settlement in which it was alleged the government was defrauded.

According to the lawsuit, the bank passed along subpar loans to the Federal Housing Administration 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.

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