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The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General audited CitiMortgage’s processing of partial claims.  Our audit objective was to determine whether CitiMortgage filed for partial claims only after completing the loan modifications and reinstating the loans.

CitiMortgage improperly filed for 66 partial claims before completing the loan modifications and reinstating the loans. The Federal Housing Administration insurance fund paid out more than $1.7 million for these improper partial claims, including the lender incentive fees.  CitiMortgage had repaid $722,893 of these claims before our audit.

We recommend that HUD’s Deputy Assistant Secretary for Single Family Housing require CitiMortgage to (1) repay HUD for improperly filed partial claims and incentive fees totaling more than $1 million, (2) work with HUD to ensure the release of the liens on the 66 properties with improper partial claims, and (3) perform an internal review of all FHA-HAMP partial claims that were combined with loan modifications to determine their eligibility and report the results to HUD for the repayment of improperly filed partial claims.