Deutsche Bank paying $202M in settlement with feds

Michael P. Tremoglie May 17, 2012, 10:43am

NEW YORK (Legal Newsline) - Deutsche Bank will pay $202.3 million to the United States to resolve allegations made under the False Claims Act, the Department of Justice announced May 10.

The DOJ sued the bank for alleged repeated false certifications to the Department of Housing and Urban Development and the Federal Housing Authority.

The suit alleges approximately a decade of misconduct by Mortgageit - a wholly-owned subsidiary of Deutsche Bank - in connection with residential mortgage origination practices. Mortgageit participated in the Federal Housing Administration's Direct Endorsement Lender Program, which delegates authority to participating private lenders to endorse mortgages for FHA insurance.

The DOJ alleged that the defendants submitted false certifications to HUD, including false certifications that Mortgageit was complying with HUD rules when in fact it was not. According to DOJ, the defendants admitted, acknowledged, and accepted responsibility for certain conduct alleged in the complaint.

Mortgageit also misrepresented that certifications sent to HUD were eligible for FHA mortgage insurance when they were not, the DOJ said. As a result, FHA insured certain loans that were ineligible and that HUD consequently incurred losses when some of those loans defaulted, the SEC said.

Manhattan U.S. Attorney Preet Bharara stated: "Mortgageit and Deutsche Bank treated FHA insurance as free Government money to backstop lending practices that did not follow the rules. Participation in the Direct Endorsement Lender program comes with requirements that are not mere technicalities to be circumvented through subterfuge as these defendants did repeatedly over the course of a decade. Their failure to meet these requirements caused substantial losses to the Government - losses that could have and should have been avoided. In addition to their admissions of responsibility, Deutsche Bank and Mortgageit have agreed to pay damages in an amount that will significantly compensate HUD for the losses it incurred as a result of the defendants' actions."

The defendants will pay the $202.3 million within 30 days of the settlement.

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