MANHATAN – Deutsche Bank agreed Thursday to a $202.3 million settlement against charges that it defrauded the government for a decade about mortgages that did not comply with federal law.
The government filed suit against the bank and its subsidiaries, including MortgageIT, last year under the False Claims Act.
“Deutsche Bank and MortgageIT repeatedly lied to be included in a government program to select mortgages for insurance by the government,” according to the complaint. “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-insured mortgages, thousands of American homeowners have faced default and eviction, and the government has paid hundreds of millions of dollars in insurance claims, with hundreds of millions of dollars more expected to be paid in the future.”
Among the bank’s concessions in the settlement announced today, MortgageIT admitted that, contrary to its representations, it did not conform to all applicable regulations of the Federal Housing Administration (FHA) and the U.S. Department of Housing and Urban Development (HUD)
It also admitted that it misrepresented certain loans to HUD as eligible for FHA mortgage insurance.
Since FHA insured some of these improper loans, the department incurred losses when the loans defaulted.
U.S. District Judge Lewis Kaplan approved the settlement.
The Deutsche Bank suit was one of four that government brought against major lenders involved in alleged reckless residential mortgage lending.
It is the third to settle, reaching an amount about $50 million to $70 million hire than the government’s agreements with CitiMortgage and Flagstar Bank, respectively.
“With today’s settlement, the government has achieved settlements totaling $493.4 million in the last three months,” according to the U.S. Attorney’s Office. “In each settlement, the defendants have admitted and accepted responsibility for certain conduct alleged in the government’s complaint.”
A fourth case, against Allied Home Mortgage and two of its officers, remains pending.