CitiMortgage to pay $158.3 million penalty

Feb. 15, 2012 at 4:11 PM

NEW YORK, Feb. 15 (UPI) -- CitiMortgage Inc. has agreed to pay $158.3 million to settle charges it failed to meet U.S. quality standards with mortgages insured by the government.

"For far too long, lenders treated [the Department of Housing and Urban Development] insurance of their mortgages like they were playing with house money. In fact, they were playing with other people's money and other people's homes," said Preet Bharara, the U.S. attorney in Manhattan.

The Wall Street Journal said Wednesday CitiMortgage, a subsidiary of Citigroup Inc., failed to take adequate steps to ensure the quality of about 30,000 mortgages since 2004. Thirty percent of those mortgages have gone into default.

HUD has paid out $200 million to cover the contracts that failed, the Journal said.

CitiMortgage was obligated to verify income and employment of the borrowers. But prosecutors charged the bank with failing to meet those obligations.

Last week, Bank of America agreed to pay $1 billion to settle similar charges concerning loans guaranteed by the Federal Housing Administration.

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