A Tennessee bank agreed to pay $212.5 million to the federal government for violating the law and approving loans that didn't meet federal requirements.
Benjamin Mizer, principal deputy assistant U.S. attorney general, said First Tennessee Bank N.A. was accused of originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development's Federal Housing Administration even though they didn't meet the program requirements.
“First Tennessee’s reckless underwriting has resulted in significant losses of federal funds and was precisely the type of conduct that caused the financial crisis and housing market downturn,” Mizer said. “We will continue to hold accountable lenders who put profits before both their legal obligations and their customers, and restore wrongfully claimed funds to FHA and the treasury.”
The bank was accused of approving the loans between January 2006 and December 2008 through its subsidiary First Horizon Loans Corp. The lawsuit alleged First Tennessee didn't comply with FHA origination, underwriting and quality control requirements. The bank admitted in the settlement that it certified the loans even though they weren't up to HUD standards, and that senior executives in the banks knew about the issues but failed to report any of the hundreds of loans.