Citigroup Inc. has agreed to pay $158.3 million to settle civil claims that it defrauded the government into insuring thousands of risky home loans made by its CitiMortgage unit.

CitiMortgage "admits, acknowledges and accepts responsibility" for misleading the government into insuring risky home loans, according to settlement papers. Investigators said the misconduct continued for more than six years.

The settlement resolves claims under the federal False Claims Act against the third-largest U.S. bank.

The civil fraud case arose from a "whistleblower" lawsuit brought by Sherry Hunt, a CitiMortgage employee in Missouri. Whistleblowers can receive up to 25% of settlements reached with the government in such cases, depending on how much work they contributed. It was not immediately clear how much Hunt, a quality control manager at CitiMortgage, might recover. Neither she nor her lawyer, Finley Gibbs, responded to requests for comment.

Citigroup spokesperson Mark Rodgers said the bank has set aside the money to cover the payout. The bank had said last week it was taking a $125 million after-tax charge against results for its just-completed fourth quarter in connection with mortgage litigation.

The government accused Citigroup of falsely certifying that many of its loans qualified for insurance from the Federal Housing Agency, which is part of the U.S. Department of Housing and Urban Development.

Investigators said 9,636, or more than 30%, of nearly 30,000 HUD-insured mortgage loans that CitiMortgage made or underwrote since 2004 have defaulted, costing the agency nearly $200 million in insurance claims. The government also contended that even after a 2008 HUD audit found "numerous defects" in CitiMortgage's oversight of loans in default, quality control deteriorated.

It said this was partly because the unit pressured workers to encourage quality control personnel to ignore problems, rewarding them with higher salaries if they succeeded.

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