Citigroup will have to pay $158 million to settle charges that its mortgage unit defrauded the Federal Housing Administration.  Government officials said that the bank had inaccurately claimed that certain mortgages were eligible for government insurance. Under the FHA's Direct Endorsement Lender program, lenders like Citi's CitiMortgage division can submit certain loans for government insurance in case a borrower defaults.  The lenders are required to maintain their own quality control programs to ensure that loans submitted for such insurance have been prepared properly and there is no evidence of fraud. However, according to the U.S. Attorney's Office in Manhattan, CitiMortgage repeatedly obscured or downplayed problems with loans it submitted for insurance over the past decade.  Citi ignored roughly 1,000 cases of potential fraud and failed to verify information on borrowers' ability to make payments, according to the complaint in the case. Of the 30,000 mortgages that Citi had endorsed for FHA insurance going back to 2004, more than 30% have defaulted - nearly half of those (47%) originated in 2006 and 2007.  [C-I Note:  That should come as no surprise because that was just before the credit crisis hit and, throughout the country, mortgages were being issued to anyone, regardless of their creditworthiness. The government notes that it has already paid out nearly $200 million in claims on these loans - largely because a "substantial percentage" of those mortgages should never have been eligible for insurance.  Federal officials brought similar cases in relation to the FHA insurance program last year against Deutsche Bank and Allied Home Mortgage Corporation. Distinctive Nature of this Case. The case is distinct from the nationwide settlement announced last week in which Citi and 4 other large lenders committed $26 billion to help underwater homeowners and compensate those who lost their homes due to improper foreclosure practices.  The other banks were BofA, JPMorgan, Wells Fargo, and Ally Financial. For its part, Citi is "pleased to resolve this matter in conjunction with the National Mortgage Settlement reached last week." A spokesman said the bank takes its quality assurance processes seriously and have pro-actively undertaken process improvements to ensure that they are as robust as possible." Citi admitted responsibility for failing to comply with the insurance program as part of the settlement, which was approved by U.S. District Judge Victor Marrero on Wednesday. For further details, go to:   [CNN Money, 2/15/12].