Deutsche Bank agreed on Thursday to pay the federal government more than $200 million to settle accusations that it knowingly misled the Department of Housing and Urban Development about the quality of mortgages that later defaulted.
The defaults ultimately cost taxpayers about $368 million. The settlement resolves a lawsuit filed against Deutsche in May 2011 by the United States attorney for the Southern District of New York, Preet Bharara, along with HUD and the Department of Justice .
The home loans were issued by MortgageIT, a mortgage provider that Deutsche Bank bought in 2007. Under the terms of the settlement, Deutsche Bank admitted it should have known that MortgageIT’s practices did not conform to HUD rules after it made the acquisition. The $202 million settlement is a significant victory for the federal Financial Fraud Enforcement Task Force , which was established to investigate the abuses that culminated in the financial crisis of 2008 and early 2009.
MortgageIT insured the loans under a Federal Housing Administration program called Direct Endorsement Lender despite the fact that they did not qualify under the rules of the program and were not eligible for the insurance, according to the suit. When the loans later soured, the government was obligated to cover the losses.Page 1 of 3 | Next Page