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The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General audited the 68 Federal Housing Administration (FHA) claims submitted by CitiMortgage, Inc., of O’Fallon, MO. Our audit objective was to determine whether Citi properly determined that borrowers were eligible to participate in the Preforeclosure Sale Program.

We found that Citi improperly submitted claims totaling nearly $5 million for 63 of the 68 preforeclosure sales reviewed without properly determining borrower eligibility to participate in the Program. Citi did not always verify that the borrowers had defaulted or were in imminent danger of default as a result of an adverse and unavoidable financial situation. Additionally, Citi did not complete comprehensive reviews of the borrowers’ financial records to demonstrate that the borrowers did not have sufficient income or assets to sustain the mortgage.

We recommend that the U.S. Department of Housing and Urban Development (HUD) require Citi to reimburse HUD for the 63 improper claims totaling nearly $5 million. Additionally, we recommend that HUD require Citi to develop and implement policies and procedures to ensure that it properly determines the eligibility of borrowers to participate in the Program.