Deutsche Bank agreed to pay a $202.3 million penalty to settle the government’s civil lawsuit accusing it of mortgage fraud, U.S Attorney Preet Bharara announced today. The suit was filed last week. The bank admitted to government allegations that its MortgageIT unit defrauded the Federal Housing Administration and the Department of Housing and Urban Development for more than a decade.
The bank submitted loans it underwrote for federal mortgage insurance even when those loans were ineligible for the government’s guarantee.
MortgageIT was said to have submitteed false certifications to HUD which said the loans were in compliance with the agency’s standards for federal insurance. But when those loans defaulted, the government incurred losses.
“MortgageIT and Deutsche Bank treated FHA insurance as free government money to backstop lending practices that did not follow the rules,” Bharara said. “Their failure to meet these requirements caused substantial losses to the government – losses that could have and should have been avoided.”
MortgageIT endorsed more than 39,000 loans since 1999, according to the U.S. Attorney’s office, and the FHA paid insurance claims on more than 3,200 of them at a total cost of more than $368 million. Deutsche acquired the lender in 2007. — Adam Fusfeld