The United States Attorney for the Southern District of New York and the General Counsel of the U.S. Department of Housing and Urban Development (“HUD”) announced that CitiMortgage, Inc. (“CitiMortgage”), a subsidiary of Citibank, N.A., has agreed to settle a qui tam lawsuit for $158.3 million. The government joined the whistleblower lawsuit filed in August 2011 by relator Sherry Hunt, CitiMortgage’s vice president of quality assurance.
The Complaint, filed under the False Claims Act, alleged that for more than six years beginning in 2004, CitiMortgage failed to comply with the Federal Housing Administration (“FHA”) Direct Endorsement Lender Program. According to the Justice Department, in the settlement, CitiMortgage admitted its failure to comply with HUD-FHA requirements by submitting certifications stating that certain loans were eligible for FHA mortgage insurance when they were not and, as a result, HUD incurred losses when the loans, that should never have been endorsed, defaulted.
If a Direct Endorsement Lender approves a mortgage for FHA insurance and the borrower later defaults on the mortgage, the mortgage holder may submit an insurance claim to HUD for the costs associated with the defaulted mortgage, which HUD must pay. Neither the FHA nor HUD reviews a mortgage prior to its approval for FHA insurance. As such, CitiMortgage, as a Direct Endorsement Lender, was required to follow program rules to endure it was properly underwriting and endorsing mortgages for FHA insurance.
The whistleblower alleged that since 2004, CitiMortgage has endorsed nearly 30,000 mortgages with a value of $4.8 billion for FHA insurance, but repeatedly submitted knowingly or recklessly false certifications regarding their eligibility for FHA insurance. The Complaint further alleged that CitiMortgage failed to perform basic due diligence; failed to verify information in the loan file regarding the borrower’s ability to repay the mortgage; and repeatedly endorsed mortgage loans that contained serious defects, did not comply with HUD’s underwriting standards, and were not eligible for FHA insurance.
The Complaint also stated that almost one-third of the mortgages originated or underwritten by CitiMortgage since 2004 have gone into default, resulting in insurance claim payments by HUD of nearly $200 million.
Of the $158.3 million settlement amount, the whistleblower will receive $31 million as a reward.
If you have any firsthand knowledge, information, or evidence related to any federal, state, county or city government fraud, you should speak with an experienced qui tam lawyer who can help you understand your legal rights and help you obtain the compensation you deserve.
If you have a claim, contact the Florida whistleblower attorneys at McCabe Rabin, P.A. for a free and confidential consultation by calling toll free at 877.915.4040 or e-mail firstname.lastname@example.org.