[Video] Big Banks like Citi Mortgage Settle for over 26 Billion Consumers to Benefit

Posted by Jason Wheeler | Fully Follow Me | Subscribe

It will be quite interesting to see how this all plays out. I would guess that if you bought your home with an options ARM and you never refinanced these loans would likely be the first to get a slice of this settlement with the big banks.

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The Wall Street Journal says

NEW YORK—A Citigroup Inc. mortgage unit has agreed to pay $158.3 million to resolve allegations by the U.S. related to the quality of loans it submitted to a U.S. government-backed mortgage insurance program.

As part of the settlement, CitiMortgage Inc., a subsidiary of Citi’s banking business, admitted that it submitted loans to be insured by the U.S. Department of Housing and Urban Development that didn’t meet the program’s underwriting requirements.

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• Settlement: Citi v. U.S.

“For far too long, lenders treated HUD’s 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.

Wednesday’s settlement is the latest effort by federal prosecutors to pursue civil penalties against companies that allegedly played a role in the housing crisis.

Last year, federal prosecutors in Manhattan brought similar civil lawsuits against closely held Houston-based home lender Allied Home Mortgage Capital Corp. and Deutsche Bank AG over alleged misrepresentations regarding the government-backed program, which was administered by the Federal Housing Administration.

Last week, Bank of America Corp. agreed to pay $1 billion to settle civil allegations by federal prosecutors in Brooklyn over similar alleged conduct regarding FHA loans.

The pact follows a separate $25 billion settlement with five banks, including Citigroup, announced last week over alleged foreclosure abuses by lenders.

In a settled lawsuit filed in Manhattan federal court on Wednesday, prosecutors alleged that more than 30% of the nearly 30,000 mortgages originated or underwritten by CitiMortgage since 2004 and guaranteed by the U.S. government have defaulted. HUD has paid out nearly $200 million in insurance claims and expects to pay more in the future.