Citigroup Inc has agreed to pay $158.3 million to settle U.S. civil claims that it defrauded the government into insuring thousands of risky home loans made by its CitiMortgage unit. Wednesday’s settlement resolves claims under the federal False Claims Act against the third-largest U.S. bank, and arose from a “whistleblower” lawsuit brought by Sherry Hunt, a CitiMortgage employee in Missouri.
CitiMortgage “admits, acknowledges and accepts responsibility” for misleading the government into insuring risky home loans, according to settlement papers filed in U.S. District Court in New York. Investigators said the misconduct lasted for more than six years.
The civil fraud case is part of a crackdown by the Department of Justice against lenders it believes contributed to the housing crisis by originating risky home loans that should not have been made, insured or sold. Whistleblowers can receive up to 25 percent of settlements reached with the government in such cases, depending on how much work they contributed.