Feds Charge Deutsche Bank with Mortgage Fraud

 

Federal prosecutors have filed a civil mortgage fraud lawsuit against Deutsche Bank and MortgageIT unit for alleged “reckless lending practices,” according to a New York Times Dealbook article entitled “U.S. Sues Deutsche Bank Over Mortgages.” Deutsche Bank acquired MortgageIT in July 2006. The complaint reportedly seeks over $1 billion in treble damages and penalties under the False Claims Act.

Lenders in the Federal Housing Administration program that insures mortgages are required to perform due diligence on the mortgages they endorse, and are “entrusted with safeguarding the public from taking on risks that exceed statutory and regulatory limits.” According to the complaint, however, MortgageIT underwriters falsely certified that they had performed such due diligence.

According to the article, quoting the complaint: “The bank and its subsidiary “repeatedly lied to be included in a government program to select mortgages for insurance by the government’. Once in that program, they recklessly selected mortgages that violated program rules in blatant disregard of whether borrowers could make mortgage payments. While Deutsche Bank and MortgageIT profited from the resale of these government-issued mortgages, thousands of American homeowners have faced default and eviction.”

In one example cited in the complaint, MortgageIT received letters detailing underwriting violations, which it stuffed, unread and unopened, in a drawer, according to the article.

MortgageIT mortgages allegedly accounted for more than $386 million in FHA insurance claims and costs.

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