CITI’S FLAWED MORTGAGE MACHINE

CITIMORTGAGE, WHICH EMPLOYS 9,200 PEOPLE TO PROCESS HOME LOANS, PAID $158.3 MILLION IN A SETTLEMENT, ADMITTING IT HAD CERTIFIED THOUSANDS OF MORTGAGES THAT DIDN’T MEET GOVERNMENT STANDARDS.

ILLUSTRATION BY ANDREA MANZATI

1 BUYING LOANS

Citi has different groups that identify mortgages Citi might buy from brokers and outside lenders. The bank also originates its own mortgages.

2 APPROVING LOANS

So-called underwriters — such as Sherry Hunt and Richard Bowen — examine mortgages the bank might buy to make sure they’re sound. Many loans didn’t meet bank standards. Citi bought them anyway.

3 CHECKING LOANS

CitiMortgage’s quality-control team, which Hunt joined in 2008, reviews a sample of loans after the bank buys them. Any with signs of possible fraud are sent to investigators.

4A INVESTIGATING FRAUD

Citi’s fraud prevention and investigation group is required to report bad loans to Fannie Mae, Freddie Mac and the FHA, which insures home loans. It didn’t.

4B REBUTTING FINDINGS

Citi created a team in 2009 to dispute quality-control findings. That lowered the defect rate by changing numbers in reports. It didn’t make the loans any better.

5 SELLING LOANS

Different teams sell mortgages approved by Citi and insured by the FHA.

Sources: U.S. Justice Department, Citigroup, Sherry Hunt and Bloomberg

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