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Whistleblower collects on Citigroup bad loan settlement

Citigroup deliberately approved defective loans for FHA insurance

Sherry Hunt is bringing home the cash after blowing the whistle on Citigroup for hiding bad loans from the government—because the role bad mortgages played in our current financial crisis wasn’t a good enough cautionary tale. Hunt’s $31 million payout is just a portion of the $158.3 million settlement Citigroup is paying after admitting that it certified defective loans for Federal Housing Administration (FHA) backing. The settlement is reportedly the second largest ever for a mortgage fraud case.

Hunt alleged that Citigroup had employees that served as gatekeepers and used “brute force” to pressure the quality control team into approving loans and downplaying flaws such as altered tax forms and borrowers who listed fake employers. Some employees were even reported as receiving monetary incentives to keep the number of reported problems down.

The Department of Justice said in a complaint that of the 30,000 loans worth $4.8 billion total that Citigroup has approved for FHA insurance since 2004, 30 percent of borrowers have stopped paying.

Read more, in-depth, at Bloomberg.

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